ASML, Chip-Tool Stocks Soar as Samsung, SK Plan Investments

(Bloomberg) -- Shares of companies that supply semiconductor equipment are soaring this week as increased investments from leading chipmakers in South Korea bolster investors' optimism.

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ASML Holding NV closed up 6.8% in Amsterdam, hitting a fresh record. US-listed peers Applied Materials Inc. and KLA Corp. were up more than 5% by midday in New York. On a two-day basis, the three stocks are among the best performers in the Philadelphia Semiconductor Index, which has gained 7.5% over the span.

The latest strength in the sector came after Samsung Electronics Co. and SK Hynix Inc. announced plans to build two chipmaking plants apiece in South Korea for a total of 800 trillion won ($516 billion). As they ramp up capacities to meet growing demand for memory chips, investors bet that ASML and its peers, which service tools to both firms, stand to benefit.

Read: Samsung, SK to Spend $880 Billion to Drive Korea's AI Lead

More broadly, the US chip benchmark is up 100% in the first half as it heads for the best quarter on record. Still, recent moves have come with increased volatility: the Philadelphia Semiconductor Index last week lost nearly 8%, its worst weekly performance in more than a year.

A growing list of analysts turned more positive on chip-tool makers in June, expecting top chipmakers to speed up equipment purchases. That includes Susquehanna analyst Mehdi Hosseini, who now sees the wafer fabrication equipment market hitting $250 billion in 2028, above a previous target.

For ASML in particular, the company will likely "highlight backlog strength and visibility extending beyond 12 months during the upcoming July earnings season," Hosseini said in a note Monday. The analyst bumped up ASML's price target to the highest among brokers, seeing upside of over 35% from Tuesday's close.

Among other brokers, UBS Group AG on June 10 also predicted the total chip equipment market would hit $250 billion in 2028, adding that investor concerns around supply of lithography tools is overblown. JPMorgan Chase & Co. in a June 17 note also raised estimates on the market size.

Next up, investors will likely pay close attention to ASML's earnings due on July 15. Capital spending indications by Taiwan Semiconductor Manufacturing Co., likely to be communicated on the chipmaker's earnings conference call a day later, will also be closely watched.

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--With assistance from Subrat Patnaik.

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