Chipmaking supplier ASML set to ride AI megadeals wave

By Nathan Vifflin and Toby Sterling

(Reuters) -Multi-billion dollar deals between AI firms and computer chipmakers are expected to strengthen top semiconductor equipment maker ASML's outlook when it reports third-quarter earnings on Wednesday.     

Investors and analysts expect to see evidence that customers of the Dutch firm, such as TSMC and SK Hynix, are stepping up plans to expand capacity in 2026 and beyond.

Expectations are high following a 32% run-up in ASML shares since September 2, against a 15% rise in the benchmark Philadelphia Semiconductor Index in the same period.

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In July, ASML management said it was not sure revenue would grow in 2026, amid weakness at customers Samsung and Intel. Since then, AI megadeals have sparked a chip market rally on hopes for massive datacenter expansion.

New bookings, the industry's most closely watched figure at ASML, are forecast at 5.36 billion euros ($6.21 billion) in the third quarter, say analysts polled by researcher Visible Alpha. In the first half, new bookings totalled 9.48 billion euros.

The company is also expected to report a 1.4% increase in third-quarter net income to 2.11 billion euros from a year earlier, according to LSEG IBES data.

Firms, including Meta and Oracle, announced deals with chip suppliers including NVIDIA, AMD, Intel and Samsung. All of these spell impending demand for ASML tools, essential for creating the circuitry of chips.

"It's clear that the sentiment has changed, management will need to give some indication of what they are seeing in the market," said Morningstar analyst Javier Correonero.

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But building chipmaking plants takes years, and analysts want ASML to explain to what extent customers are able to accelerate plans.

"Every memory chipmaker is likely to increase production capacity for AI - Micron, SK Hynix, Samsung, even Chinese players," said Degroof Petercam analyst Michael Roeg.

At $300 million or more apiece, ASML's tools are the priciest equipment in a chip factory, but they have a lengthy delivery lead time of 8-12 months. 

Chipmakers must balance the cost of ordering them too early or being unable to produce chips if they arrive too late.

During the COVID pandemic, ASML's order backlog soared as it was unable to meet demand. It has since been working to expand capacity. 

Top customer TSMC, which manufactures almost all advanced AI chips, is expected to increase purchases, and Intel's outlook has also improved, analysts said.

($1 = 0.8633 euros)

(Reporting by Nathan Vifflin in Gdansk, Toby Sterling in Amsterdam; Editing by Matt Scuffham and Bernadette Baum)