ASML (ASML) is expected to benefit from continued growth in extreme ultraviolet, or EUV, demand, with supply tightness likely to continue for the next two to three years, RBC Capital Markets said in a note Monday.

According to RBC, robust generative AI investment, tight DRAM supply and intensifying competition among leading-edge foundry customers are driving strong EUV demand. The company said that near-term upside is likely to remain modest because of long lead times.

RBC raised its 2027 outlook for EUV shipments to about 90 low-NA systems from a prior forecast of more than 80 units and expects demand to exceed 90 units in both 2027 and 2028.

The brokerage said the EUV supply tightness raises the question of whether ASML should be more aggressive on pricing, although it believes unit and mix tailwinds are sufficient to drive continued outperformance. RBC said that the current environment "looks ripe" for pricing actions that could further accelerate revenue and margin growth.

For Q2, RBC increased its earnings estimate to 6.89 euro ($7.86) per share from 6.78 euro and raised its revenue forecast to 9 billion euro from 8.7 billion euro.

RBC raised its price target on ASML to $2,000 from $1,700 and reiterated its Outperform rating.