Why ASML Holdings Plunged Today
Key Points
A tech publication reported that China will produce its own DUV machines this year.
The implication is a potential competitive threat to ASML, which dominates lithography.
However, a closer look at the report and ASML's current demand makes the fears seem way overblown.
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Shares of ASML Holdings (NASDAQ: ASML) fell on Monday, plunging as much as 8.2%, before recovering to a 6.7% decline as of 2:30 p.m. EDT.
The news has been terrific for ASML as of late, with the stock running up over 75% at one point in late June, and its valuation exceeding 60 times earnings.
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That kind of run-up leaves even the best stocks vulnerable to a pullback at the slightest hint of negative news. And investors got a negative rumor today from tech publication The Information, which reported that China is beginning to make machines that will compete with ASML's.
China to "mass-produce" DUV machines?
Today, The Information reported that China has begun manufacturing its own deep-ultraviolet lithography (DUV) machines. The report cited that the machines had been built by an unnamed, state-backed Chinese company.
ASML dominates the lithography market; however, it should be noted that DUV machines aren't the most advanced technology ASML produces. Those are extreme ultraviolet lithography (EUV) machines, which are far more expensive, and from which China is prohibited from buying altogether. The U.S. also recently restricted the sale of certain advanced DUV machines to China, as Chinese semiconductor production and AI capabilities have increased.
Image source: ASML.
But the fear seems way overblown
Investors may have sold ASML and other semiconductor stocks on the headline, given that ASML still has a fair amount of sales coming from China and DUV systems. However, that number isn't as large as it once was. DUV sales as a percentage of overall sales have decreased from 44% in 2024 to 42% in 2025 to just 29% last quarter, as EUV sales have grown as a percentage of ASML's business. The same goes for sales to China, which were 41% in 2024, 33% in 2025, but just 14% last quarter. These trends are likely to continue.
Additionally, there is now a much greater demand for DUV systems from chipmakers outside China, driven by the AI boom that has boosted demand for all types of chips and chipmaking equipment. According to the Information, the new Chinese equipment venture will only produce five machines this year and will target 20 next year. That compares with ASML's current annual capacity of 130 DUV immersion machines, which ASML management said it is looking to increase by 30% in 2027 and possibly another 30% in 2028 to meet stepped-up AI demand.
Therefore, this report of a new Chinese "competitor" doesn't seem like much of a threat to ASML, at least for the next several years, making the sell-off a decent buying opportunity in ASML stock for those with a long-term investing horizon.
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Billy Duberstein and/or his clients have positions in ASML. The Motley Fool has positions in and recommends ASML. The Motley Fool has a disclosure policy.
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