Bank of America's downgrade zeroed in on hybrid bonding, an advanced packaging technique where Besi currently leads. The firm shifted its rating to neutral, cut its price target by almost half, and shares fell as much as 6.4% on Tuesday.
The stock already had a bruising third quarter, ranking as the Stoxx 600's biggest laggard. A Bloomberg chart showed the shares 40% below their June high. Worries that memory makers could delay hybrid bonding adoption also weighed on sentiment, with the stock dropping about a third during Q3. Even so, the shares remain up 45% this year.
Analysts led by Didier Scemama highlighted ASML's publicly stated plans to enter hybrid bonding as a swing factor. In their note, they wrote, "The threat that a company like ASML could enter Besi's key growth market, as well as the risk that Besi may need to invest more heavily in R&D, is not reflected in the stock and could remain an overhang" until ASML's roadmap is clearer.
Engineering snags are part of the backdrop. Bank of America pointed to low production yields as a brake on adoption. Stacking multiple logic or memory chips demands tighter accuracy, which could play to ASML's strengths in high-precision, high-speed lithography. During an April earnings call, ASML's Chief Executive, Christophe Fouquet, noted that the firm is continuing to "look at the opportunity to support our customers" in hybrid bonding. Representatives for Besi and ASML did not provide a comment right away when asked.
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Besi's bull case still leans heavily on hybrid bonding. Bernstein projects that by 2028, 75% of hybrid bonders delivered could bear Besi's branding. In an optimistic case, Besi expects to deliver more than 2,000 tools by 2030, and its latest annual report points to cumulative orders above 150 by the end of 2025.
ASML introduced its inaugural advanced-packaging offering last year. The prospect of a heavyweight rival stepping into hybrid bonding injects uncertainty that could affect how investors value Besi, Bank of America said, even though the analysts are not assuming ASML will take a large slice of the market.
This is a tug-of-war between a breakout technology and execution risk. Besi's up big this year, but a potential ASML entry and slower customer uptake could keep a lid on enthusiasm until plans get clearer. If you follow chip equipment, keep an eye on hybrid bonding adoption and yield improvements, because that is what ultimately moves orders and, by extension, your returns.
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