UBS Names Top European Chip Stocks to Watch Ahead of Q3 2026 Earnings Season

Europe's semiconductor sector is heading into the third-quarter 2026 earnings season with artificial intelligence spending once again becoming the central growth driver. In a September 29 research note, UBS analyst François-Xavier Bouvignies highlighted ASML Holding, ASM International and STMicroelectronics as key European semiconductor names to watch.

The UBS view is built around two themes: continued AI-related capacity expansion and the potential for semiconductor equipment demand to remain strong through 2027 and 2028. UBS raised its wafer-fab equipment, or WFE, forecast and expects the global market to reach roughly $225 billion in 2027, representing about 43% year-over-year growth, with potential to approach $275 billion-$300 billion in 2028.

That makes the upcoming earnings reports important not only for individual companies but also for investors trying to determine whether the AI semiconductor investment cycle is broadening beyond the largest U.S. chipmakers.

Why European Chip Stocks Are Back in Focus

The semiconductor industry is entering another major investment phase as chipmakers expand capacity for AI accelerators, high-bandwidth memory, advanced logic and related infrastructure.

For equipment companies, this spending matters because semiconductor manufacturers need more fabrication equipment before they can increase chip production. That creates a relatively indirect way to participate in AI growth.

UBS expects semiconductor capital-equipment demand to benefit from AI-driven capacity expansion and maintains above-consensus earnings estimates for most of the European companies it covers, with its 2027-2028 estimates more than 10% above consensus across the sector.

The distinction between chip designers and equipment suppliers is important. A company does not need to sell an AI accelerator directly to benefit from the construction and expansion of the factories producing those chips.

ASML: The Key Test for AI Chip Capex

ASML Holding is the most important name in UBS's European semiconductor view.

UBS expects ASML to provide an important signal when it reports third-quarter results on October 14, 2026. The analyst expects management to guide toward more than 30% revenue growth in fiscal 2027 and potentially update capacity expectations for low-NA and immersion lithography systems for 2027 and 2028.

ASML's position is unusual because it is the world's leading supplier of advanced lithography equipment, including extreme ultraviolet, or EUV, systems used in leading-edge semiconductor manufacturing. Its equipment is therefore closely tied to the capital-spending plans of major chip manufacturers.

UBS estimates ASML's third-quarter revenue at approximately €12.1 billion, about 3% above consensus, according to the research note. The firm also argues that pricing could become an important earnings lever over the next several years.

For investors, the most important part of ASML's report may therefore be forward guidance rather than the historical quarter.

Questions around order intake, customer capacity plans, EUV demand and management's 2027 outlook could provide a clearer indication of whether the current AI investment cycle is sustainable.

ASM International: Advanced Deposition Exposure

ASM International is another semiconductor equipment company UBS is watching closely.

ASM specializes in wafer-processing equipment, particularly deposition technologies such as atomic layer deposition. Its equipment is used in the production of increasingly sophisticated semiconductor structures.

UBS expects ASM's revenue to grow 36% in fiscal 2027, compared with a 29% consensus estimate, followed by 33% growth in 2028 versus consensus of 19%. The brokerage's earnings estimates are also above consensus for both years.

The upcoming October 27, 2026 earnings report will be important because UBS expects management to discuss improving visibility across advanced logic, memory and mature-node demand.

That mix is worth watching.

AI investment is often associated with cutting-edge processors, but semiconductor manufacturing involves several layers of equipment and processes. If demand spreads across both advanced and mature production capacity, equipment suppliers can potentially benefit from a broader spending cycle.

STMicroelectronics: A Different AI Opportunity

STMicroelectronics offers a different exposure from ASML and ASM International.

ST makes chips used across areas including automotive, industrial applications, power management and connected devices. Its strategy also increasingly includes AI-related and data-center opportunities.

ST reported $3.49 billion of revenue in Q2 2026, up 26% year over year, with a 34.8% gross margin. The company is scheduled to report Q3 results on October 29, 2026.

UBS expects ST's 2027 earnings to benefit from growth in silicon photonics and AI-related power products. The brokerage estimates silicon-photonics revenue could reach roughly $2 billion in 2027 and $2.5 billion in 2028. It also estimates total data-center revenue of approximately $2.5 billion in 2027, or about 14% of group sales, rising toward $3.8 billion, or around 19%, in 2028.

This gives ST a different earnings setup.

Unlike ASML and ASM, whose investment case is heavily connected to semiconductor manufacturing equipment, ST's potential AI upside is linked more directly to products used in data-center infrastructure.

What UBS Expects From the Q3 Earnings Season

The UBS thesis is not simply that semiconductor companies will report strong historical numbers. The bigger focus is on 2027 and 2028 visibility.

For ASML, the key question is whether management's forward revenue and capacity commentary supports a sustained expansion in semiconductor equipment spending.

For ASM International, investors will be watching whether advanced logic and memory demand translate into stronger order visibility.

For STMicroelectronics, the focus will be on whether data-center and AI-related businesses can become large enough to materially change the company's growth profile.

These distinctions matter because semiconductor stocks can move significantly on guidance even when reported quarterly results are broadly in line with expectations.

The Valuation Question

Strong earnings expectations do not automatically mean lower risk.

UBS itself points to elevated valuation levels for some semiconductor equipment stocks. ASM, for example, was trading at approximately 7.9 times forward enterprise value-to-sales, compared with a 10-year average of 5.7 times, according to the research note.

That means investors are already assigning considerable value to future growth.

The result is a higher sensitivity to guidance. If companies deliver strong current-quarter numbers but reduce their longer-term expectations, the market response could still be negative.

Conversely, evidence of stronger-than-expected AI-related capital spending could reinforce the current earnings-growth narrative.

What Are the Main Risks?

AI capital-spending slowdown

The biggest sector-level risk is a reduction in AI infrastructure investment. Semiconductor equipment orders are ultimately dependent on chipmakers' willingness to spend billions on new capacity.

High valuations

Several European semiconductor stocks have already benefited from expectations of strong AI-driven growth. Higher valuations can increase the market's sensitivity to earnings disappointments.

Semiconductor cyclicality

Chip manufacturing remains cyclical. Even during a strong AI investment cycle, traditional markets such as industrial electronics, smartphones and automotive chips can experience periods of weakness.

Export controls and geopolitics

European semiconductor companies operate within a global supply chain exposed to trade restrictions, export controls and geopolitical tensions involving major semiconductor-producing economies.

Currency movements

ASML, ASM and ST generate revenue across multiple regions, meaning exchange-rate movements can affect reported financial results and margins.

The Next Catalysts for European Chip Stocks

The earnings calendar provides a clear sequence of potential catalysts.

October 14 — ASML: Investors will focus on Q3 results, 2027 revenue expectations, order intake and lithography demand.

October 27 — ASM International: The market will watch order visibility across advanced logic, memory and mature-node applications.

October 29 — STMicroelectronics: Revenue guidance, data-center exposure, silicon photonics and AI power products will be key areas of attention.

Beyond individual earnings reports, investors should monitor global semiconductor capital expenditure plans, memory pricing, AI accelerator demand and the spending plans of major foundries and integrated device manufacturers.

UBS European Chip Stocks: What Investors Should Watch

Conclusion

UBS's latest European semiconductor research highlights a sector increasingly tied to the next phase of AI infrastructure spending. The firm's September 29 note points to ASML, ASM International and STMicroelectronics as important names to monitor ahead of Q3 2026 earnings, with semiconductor equipment companies particularly exposed to the expected expansion in wafer-fab spending.

The key takeaway is that investors should look beyond quarterly revenue and EPS. Forward guidance, order visibility, AI-related capital expenditure, pricing and the sustainability of 2027-2028 growth assumptions are likely to matter more for these stocks.

ASML's October 14 report will be the first major test, followed by ASM International on October 27 and STMicroelectronics on October 29. Together, the three reports could provide a useful read-through on whether Europe's semiconductor industry is entering another leg of AI-driven investment or whether expectations have already moved too far ahead of fundamentals.

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This article is for informational and educational purposes only and should not be considered investment advice.