2 major positive news hit ASML, will AI exceed expectations and spread upstream? | AI dehydration

Author: Zhang Yifan

Editor: Shen Siqi

Source: Hard AI

Whether AI demand can continue to exceed expectations has always been the focus of the market.

ASML, TSMC, and NVIDIA can be considered the upstream, midstream, and downstream of the AI industry chain. Any changes in data from any of these companies make investors' hearts beat faster.

Today, the Economic Daily reported that due to strong demand for the 2nm process, TSMC's capital expenditure for 2025 is expected to reach $32 billion to $36 billion. Compared to the "capital expenditure for 2024 is expected to be between $28 billion and $32 billion" mentioned at the April meeting earlier this year, it has been raised by about $4 billion.

The unexpected upward adjustment of capital expenditure by TSMC naturally leads the market to wonder if ASML's performance will also be adjusted upwards.

Coincidentally, last weekend, Morgan Stanley released a report detailing the three major variables that will determine whether ASML's performance this year will exceed expectations:

1. TSMC's order situation with ASML;

2. HBM demand, Samsung, Micron, and SK Hynix's order situation with ASML;

3. The situation in the Chinese market, where the revenue share is high (in Q1 2024, the revenue share of the Chinese region accounted for 49% of ASML's total revenue);

For ASML, not only did TSMC bring good news, but SK Hynix also adjusted its HBM production capacity plan this week.

With two catalytic factors coming at once, are ASML shareholders going to be happy? Let's take a closer look.

1. TSMC

The Economic Daily reported today that due to strong demand for the 2nm process, TSMC's capital expenditure for 2025 is expected to reach $32 billion to $36 billion. Compared to the "capital expenditure for 2024 is expected to be between $28 billion and $32 billion" mentioned at the April meeting earlier this year, it has been raised by about $4 billion.

Approximately $4 billion could purchase 22 ASML EUV devices (each EUV device costs about €173 million).

EUV lithography machines are mainly used for the construction of 3nm/2nm production lines.

Previously, TSMC revealed at the April meeting that they had already ordered 30 and 35 EUV devices for 2024 and 2025, respectively. This increase in capital expenditure may increase the number of EUV devices purchased, benefiting ASML.

However, it is worth noting that TSMC has not commented on the market rumors regarding the upward adjustment of capital expenditure, and emphasized that progress on 2nm and capital expenditure will mainly follow the content of the April meeting earlier this year.

2. HBM Boost

On June 30, SK Hynix announced an investment of 103 trillion Korean won (approximately $74.7 billion) and plans to further strengthen its business in AI storage chips by 2028 According to reports, about 80% (approximately 820 trillion Korean won) of the investment will be used to develop High Bandwidth Memory (HBM) chips to drive the development of AI chips.

As predicted in a recent report by Morgan Stanley, the significant expansion of HBM production will lead to increased demand from Micron, Samsung, and SK Hynix by 2024, thereby driving ASML's performance. SK Hynix will continue to be the leading supplier of HBM3 and HBM3E, maintaining over 50% of the overall HBM market share in the next 2-3 years.

Previously, Morgan Stanley estimated SK Hynix's capital expenditure to be 1.7 trillion Korean won annually from 2024 to 2026. The announcement of a capital expenditure of 10.3 trillion Korean won from 2024 to 2028, equivalent to an annual expenditure of 2.5 trillion Korean won, is expected to further boost orders for upstream manufacturers.

3. High NA EUV Lithography Machine

However, ASML also faces some risks with its new products.

Regarding the next-generation lithography machine, High NA EUV, Morgan Stanley predicts that ASML will not mass produce it until at least 2028, later than previously expected.

In December last year, ASML delivered the world's first High NA EUV lithography machine to Intel, which can be used to build the most advanced A10 process line (current EUV equipment is mainly used for 2/3nm processes). However, Intel's progress with this equipment has not been smooth.

Morgan Stanley predicts that TSMC is unlikely to adopt ASML's High-NA technology on a large scale before its A10 node, which is expected to begin mass production in 2028