ASML Holding (ASML Quick QuoteASML - Free Report) shares have returned 23.1% in the year-to-date period, outperforming the Zacks Computer and Technology Sector’s decline of 6.1%. However, the stock has underperformed its wafer fabrication equipment peers, including KLA Corporation (KLAC Quick QuoteKLAC - Free Report) , Lam Research (LRCX Quick QuoteLRCX - Free Report) and Applied Materials (AMAT Quick QuoteAMAT - Free Report) , each of which has returned 24.9%, 27.6% and 35.8%, respectively, in the same time frame.

ASML YTD Performance Chart

Image Source: Zacks Investment Research

Due to the rise in stock price, the stock is now trading at a premium with its Forward 12-month Price to Sales (P/S) ratio of 11.24, which is significantly higher than the sector’s P/S of 5.81X. The overvaluation is further substantiated by the Zacks Value Score of F. Given the overvaluation, investors are now wondering if it's the right time to invest in ASML stock. Let’s discuss the fundamentals before we make the next move.

ASML Forward 12-Month (P/S) Valuation Table

Image Source: Zacks Investment Research

ASML Benefits From Surging Demand Amid Global Chip Shortage

ASML rides on the back of high demand for its wafer equipment manufacturing products, driven by the rising use of advanced chips by AI data centers and hyperscalers. ASML’s net systems sales increased 12.4% year over year in 2025. The growth was mainly driven by the expansion of the logic and memory semiconductor market, which is the backbone of the AI data centers.

While logic contributed to 66% of the top line, memory contributed the remaining. ASML’s extreme ultraviolet (EUV) lithography technology contributed 48% to the top line, while deep ultraviolet (DUV) contributed 49%, and the remaining was covered by ASML’s metrology and inspection tools. ASML’s technologies like Argon Fluoride Immersion, Argon Fluoride Dry, Krypton Fluoride and Mercury I-line contributed 42%, 2%, 4% and 1%, respectively, in 2025.

While DUV still contributed more than EUV in ASML’s 2025 top line, the EUV share has grown rapidly to contribute 48% of the 2025 top line, much higher than 38% contribution of ASML’s 2024 top line. As the industry moves from 4nm to 3nm to 2nm nodes, chip manufacturers would shift from multi-patterning DUV to single-exposure EUV. The EUV technology is experiencing the highest traction among DRAM customers, followed by high bandwidth memory and DDR.

As the demand for AI applications increased, memory production was redirected toward high-margin AI applications, resulting in supply shortage of memory chips in late 2025. Rising production of HBM and DDR5, is also acting as a tailwind for ASML. However, weakness in consumer electronics is a drag for ASML, and the company is de-risking its business by focusing on high-margin AI-related processes. Other challenges, like competitive pressure, also pose a concern for investors.

Rising Competition in the Semiconductor Space is a Concern

While ASML is an unchallenged player in the lithography space, the broader semiconductor equipment market has multiple players who pose a threat to this company. Several companies have now started offering etching tools and are securing contracts for their expertise. Lam Research secured multiple critical etch wins at a major DRAM manufacturer with its new Akara etch system, which supports 3D DRAM architectures.

Lam Research’s customers have invested in DDR5, LPDDR5 and high-bandwidth memory. Lam Research’s Aether dry-resist technology was recently selected as the production tool of record for a leading DRAM customer, securing a foothold in this high-growth segment. Applied Materials also supplies equipment used in chip fabrication, including deposition and etching tools that are essential for both advanced and mature nodes.

Applied Materials specializes in Gate-All-Around transistors at 2nm and below, Backside power delivery, Advanced wiring and interconnect, HBM stacking and hybrid bonding and 3D device metrology, which are indispensable for manufacturing next-generation semiconductor chips. Another player in the broader WFE market is KLA Corporation.

KLA Corporation’s advanced packaging business has become a major growth driver, fueled by the AI boom and rising demand for high-performance computing and high-bandwidth memory (HBM). However, ASML’s venture into sub-2nm production with High Numerical Aperture (High-NA) EUV systems is the next technological leap for chipmakers. ASML’s High-NA machines will be central to that shift.

Higher adoption of EUV technology will also push the installed base revenues up. The company also ended 2025 with a €38.8 billion backlog, providing strong visibility in the revenue pipeline. The Zacks Consensus Estimate for ASML’s 2026 revenue and earnings implies growth of 19% and 21%, respectively. The Zacks Consensus Estimates for ASML’s 2026 earnings have been revised upward in the past 30 days.

Image Source: Zacks Investment Research

Conclusion: Hold ASML Stock Now

ASML remains a fundamentally strong player, supported by its leadership in EUV technology, robust order backlog and rising demand from AI-driven semiconductor investments. However, the stock’s current premium valuation limits near-term upside and raises concerns for new investors. Given these factors, we suggest that investors should hold ASML stock now. ASML carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.