Favor ASML in the short term; SAP has greater long-term upside leverage

Overview

This report compares the short-term and long-term investment outlooks for ASML and SAP. Barclays points out that AI-related capital expenditure continues to drive semiconductor sector performance, while software assets are being re-rated due to the potential impact of AI on terminal value and business models. In the short term, the report prefers ASML on the combined influence of market narrative, positioning, and fundamentals; in the long term, based on 2030 scenario valuation, the report believes both ASML and SAP are attractive, but SAP has greater relative upside if it successfully completes its AI transformation.

Core views

The core views are: first, it is still difficult to confirm a bottom for the software sector; SAP has solid fundamentals and a relatively low risk of AI-native substitution, but its share price is still being suppressed by sector sentiment. Second, ASML is benefiting from AI-driven demand for memory and advanced logic, tight EUV tool supply, and customer capacity expansion, supporting double-digit growth in 2026-2027. Third, ASML's valuation is already materially higher than SAP's, with CY27E P/E at about 30x versus about 17x for SAP, and FCF yields of 2.6% and 6.7%, respectively. Fourth, over the long term, if SAP becomes a leader in enterprise AI workflow orchestration, both valuation and growth could rerate.

Analysis framework

The report uses a framework that combines short-term narrative with fundamentals and long-term 2030 scenario valuation. In the short term, it compares market performance in software versus semiconductors, hedge fund and long-only positioning, the AI narrative, upcoming earnings, and event catalysts. In the long term, it sets up base, bull, and bear cases for ASML and SAP respectively, and estimates potential share prices using assumptions for revenue growth, margin, P/E multiples, discounted cash flow, and tool shipments.

Methodology notes

• Valuation methodsGrowth-adjusted P/E framework

  software business valuation

  Barclays prefers to value software companies using a cash-adjusted growth-adjusted P/E framework and assigns premiums or discounts based on company-specific factors; SAP is valued as a double-digit organic-growth company using 25x FY27E clean EPS.

• Valuation methodsTarget P/E valuation

  ASML valuation

  ASML is valued at about 38x 2027E P/E, above its historical average and peers, based on its monopolistic position in lithography and the improving industry outlook.

• Scenario analysis2030 scenario valuation

  long-term upside/downside

  The report builds 2030 base, bull, and bear cases for ASML and SAP, comparing potential share prices under assumptions for revenue CAGR, EBIT margin, EUV tool shipments, P/E multiples, and geopolitical conditions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• ASML HOLDING NV

  Short-term preferred; still has upside long term, but valuation is relatively high

  Strengths

  Dominant position in the critical lithography equipment segment, AI-driven demand for memory and advanced logic, tight EUV supply, and double-digit growth potential in 2026 and 2027.

  Weaknesses

  The share price has already risen sharply, valuation is well above SAP's, and market expectations for semiconductors and AI demand are already high.

  Comparison

  More supported than SAP in the short term by market narrative and fundamentals; over the long term, the base-case upside is about 55%, implying less long-term upside leverage than SAP.

  Risks

  A gap in AI demand, slower memory spending, tighter export restrictions, higher concentration among advanced customers, technological substitution, or delays in High-NA adoption.

• SAP SE

  Under pressure in the short term; greater relative upside long term

  Strengths

  Cost control improves as the cloud transition matures, lower risk of AI-native or internal substitution, an opportunity to participate in AI workflow automation, and a valuation that is slightly lower than U.S. software peers.

  Weaknesses

  The software sector is being pressured by AI terminal value debate, the share price has fallen sharply year to date, and near-term results may not be enough to change the narrative.

  Comparison

  Less attractive than ASML in the short term; over the long term, the 2030 base case implies about 135% upside and the bull case about 190%, offering greater valuation re-rating and growth rerating potential than ASML.

  Risks

  Cloud growth slower than expected, macro or competitive impacts on customer adoption, AI investment driving cost growth, weaker-than-expected AI monetization, and continued software-sector de-rating.

Key data

• SOX year-to-date performance+7%Used to illustrate the relative strength of semiconductors.
• IGV year-to-date performance-24%Used to illustrate the clear underperformance of software.
• ASML year-to-date performance+21%The report says ASML has benefited significantly from the semiconductor and AI narrative.
• SAP year-to-date performance-29%The report says SAP has been dragged down by software-sector de-rating.
• SAP short-term target priceEUR 220Based on 25x FY27E P/E, implying 48% upside from the current price.
• ASML target priceEUR 1,500The disclosure page shows an ASML target price of EUR 1,500 and a current price of EUR 1,187.60.
• ASML 2027 low-NA EUV base case78 unitsIf the capacity ramp is faster, there is upside.
• ASML short-term bull case valueapprox. EUR 1,800Assuming 85 low-NA EUV units are recognized as revenue, ASP peaks at about EUR 250m, and valuation rerates to 40/45x.
• SAP 2030 base-case valueEUR 350Implying about 135% upside, assuming 11% revenue CAGR, 35% EBIT margin, and FY30 P/E of 23x.
• SAP 2030 bull-case valueEUR 430Implying about 190% upside, assuming leadership in AI workflow orchestration, 13% revenue CAGR, 35% EBIT margin, and FY30 P/E of 27x.
• ASML 2030 base-case valueEUR 1,800Implying about 55% upside, assuming it reaches the midpoint of 2030 guidance and uses a 35x multiple.
• ASML 2030 bull-case valueEUR 2,100Implying 81% upside, assuming AI continues to drive compute demand, around 100 low-NA EUV units of demand, and 20 High-NA tools are confirmed.

Impact & implications

The investment implication is that it is not too early to switch back from semiconductors to software. ASML is supported in the short term by AI demand, customer expansion, and industry capacity constraints, but its high valuation and crowded positioning limit the margin of safety. SAP may remain under pressure in the near term due to software-sector sentiment, but it has a lower valuation and higher cash flow yield, and if management strengthens the credibility of its AI transition at events such as Sapphire, it has greater long-term rerating potential.

Risks

• The software sector may remain under pressure from negative AI-related news, and SAP may still struggle to confirm a bottom in the near term.
• ASML is sensitive to expectations for AI capex and semiconductor expansion; if demand slows or customers delay capacity additions, valuation could compress.
• Export controls and geopolitical escalation may affect ASML's China revenue and long-term demand.
• If SAP cannot demonstrate a successful AI technology transition, its long-term rerating thesis will weaken.
• Semiconductor positioning is already crowded, and if AI demand expectations are too high, ASML faces downside risk.

What to watch

• Whether SAP's May Sapphire conference provides a sufficiently clear AI transition plan, product positioning, and monetization path.
• Whether SAP CCB growth slows to around 24% as expected, and whether the market views that as in line with expectations rather than a negative signal.
• Whether ASML's 1Q26 results reaffirm current expectations and what customers say about AI-related memory and advanced logic demand.
• The pace of ASML's 2027 low-NA EUV capacity ramp and the rollout of new capacity.
• Changes in hedge fund and long-only positioning in the semiconductor and software sectors, especially whether software has truly formed a bottom.
• Export restrictions, the pace of advanced-node investment by TSMC/Samsung/Intel, and progress in High-NA EUV adoption.