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ASML expects demand for the advanced chip-printing equipment used in artificial intelligence-related chips to exceed its available supply in 2027 and 2028, putting renewed attention on whether the Dutch company can expand production quickly enough while investors assess the durability of the AI investment boom.

Chief executive Christophe Fouquet had told shareholders in April that ASML, Europe’s most valuable company, would seek to avoid becoming a bottleneck for the semiconductor industry “by all possible means.” Six months later, he acknowledged that supplies of the company’s tools for producing advanced logic and memory chips will not meet demand over the two following years.

The constraint is particularly important because ASML is the sole supplier of the most advanced extreme ultraviolet, or EUV, lithography systems. These machines cost about $200 million each and are used to make high-end chips tied to the growth in AI computing.

Han Dieperink, chief investment officer at wealth manager Aureus, which owns ASML shares, said management was openly recognising that planned capacity increases of 30% in both 2027 and 2028 would not be sufficient. “ASML itself is now the bottleneck,” he said.

Dieperink said talks over future equipment orders were already reaching into 2029 and 2030. In his view, that indicates demand could remain ahead of supply beyond the current cycle.

Plans to increase production

ASML is considering several ways to address its order backlog. They include reducing machine assembly times, upgrading equipment already installed at customers’ sites and bringing faster models to market.

The company had intended to lift annual EUV capacity to 110 machines by 2028. It is now considering production of perhaps a dozen additional systems. ASML is also increasing manufacturing capacity in Eindhoven, although the first phase of that expansion is not expected to begin operating until 2029.

Fouquet told investors on Wednesday that ASML’s own suppliers are not the factor restricting output. He said the company’s supply chain, including optical-systems supplier Zeiss, was not the limiting element.

ASML has also said it expects to benefit from higher prices in 2027 and 2028. Its shares have risen nearly 70% this year, but uncertainty surrounding the period after 2028 has shaped the market’s assessment of the company.

Valuation and AI spending concerns

Since June, analysts have increased their earnings forecasts for ASML, yet the stock has declined on a relative basis against expected future earnings. Mark Sloan, senior analyst at Stonehage Fleming, said this had improved the investment case for the company.

Stonehage Fleming’s Global Best Ideas fund has a 3.5% position in ASML. Sloan said the company’s valuation had fallen to about 30 times forward earnings from more than 45 times in June, making the shares attractive in light of ASML’s growth outlook and market position.

“We are watching AI adoption and innovation, along with capital spending plans at key customers closely,” Sloan said. “We believe supply rather than demand is likely to remain ASML’s key constraint.”

Other investors remain less certain that spending on AI infrastructure will generate returns sufficient to justify the billions of dollars currently being committed. Chip shares have also faced pressure over concerns that higher interest rates may complicate financing for major AI and data-centre projects.

The cost of insuring against defaults in the US technology sector reached record highs on Thursday. Jefferies analyst Janardan Menon said financing concerns and limits on data-centre construction, including power availability, could affect ASML.

ASML shares dropped 5% on Thursday during a wider market selloff. Menon said scepticism over the company’s high expectations for 2028 and 2029 was the main reason for the valuation decline, and said its price-to-earnings multiple could fall into the low 20s in a downturn.

Customers seek access to ASML tools

Demand for ASML’s high-end equipment has prompted customers to compete for production slots. Chief financial officer Roger Dassen said the company is requiring substantial advance payments on orders, amounts that are “enough to hurt” if a customer later seeks to cancel.

TSMC, ASML’s largest customer and a manufacturer of chips for Nvidia and Apple, said in July that it did not expect equipment supply to restrict its expansion. On Thursday, it maintained 2026 capital expenditure plans of $60 billion to $64 billion.

Samsung, SK Hynix and Micron have also reserved ASML capacity as demand rises for AI memory chips. Potential additional customers could further increase pressure on production. Elon Musk’s proposed TeraFab project, which has not yet produced its first chip, could become a significant purchaser of advanced tools.

US restrictions on China continue to present a sales risk for ASML’s mid-range DUV equipment. China is expected to account for about 20% of the company’s sales this year.

Despite the strong order outlook, ASML is not yet accepting orders for 2029 and 2030 as it evaluates customers’ readiness and its own ability to meet demand. “We don't want now to accept orders from customer A, B, and C and then to tell customer D, who hasn't given orders yet for 2029 and 2030, sorry, we're sold out,” Dassen told analysts on the company’s post-earnings call.