A Chinese AI Breakthrough Rattles Chip Stocks, but ASML’s Raised Outlook and Capacity Plans Offer a Counterweight

ASML shares fell 2.51% as tech sell-off from Moonshot AI's Kimi-K3 launch offsets strong Q2 earnings and raised 2026 revenue forecast to €43-45 billion.

The launch of Moonshot AI’s Kimi-K3 model sent a shockwave through global technology markets late last week, triggering a broad sell-off that swept up even Europe’s most valuable company. ASML saw its shares tumble 2.51% on Friday to €1,528.00, wiping out some of the gains from a blockbuster earnings report issued just two days earlier. The move had little to do with the Dutch lithography specialist itself and everything to do with a sudden bout of risk aversion across the AI supply chain, as investors recalibrated their assumptions about how long the chip boom can last.

For ASML, the timing was particularly jarring. On 15 July, the company posted second-quarter revenue of €9.33 billion, net profit of €2.92 billion, and earnings per share of €7.59, all comfortably ahead of market expectations. Gross margin hit 54%, and the group shipped 86 lithography systems during the period. More importantly, management raised its 2026 revenue forecast for the second time in just a few months, lifting the target range from €36–40 billion to €43–45 billion. Third-quarter guidance also came in strong at €11–12 billion. The initial euphoria pushed the stock up more than 7% at the open, but those gains evaporated as the week wore on.

Undeterred by the short-term market noise, ASML is pressing ahead with ambitious capacity investments to feed insatiable demand from chipmakers racing to build out AI computing infrastructure. The company plans to increase production of EUV and DUV systems by 30% annually through 2028. Deliveries of low-NA EUV machines are expected to reach around 65 units in 2026 and 85 in 2027, while roughly 130 DUV systems are slated for this year. Assembly times have already been slashed from 22 weeks to 15–16 weeks. To underscore its confidence in the workforce, ASML is awarding each of its roughly 45,000 employees a one-time stock bonus worth €20,000 — though the shares will only vest in early 2030 for those still with the company. The order backlog now stands at €38.8 billion, and a €1.1 billion share buyback programme is underway.

Wall Street analysts have largely looked past the sell-off, with several houses raising their price targets after the quarterly update. RBC now targets $2,100, Deutsche Bank €2,150, and Bernstein €2,500 per share. CFRA chief strategist Sam Stovall likened the chip sector to an army that has outrun its supply lines, arguing that the AI story remains intact even if the easy money has been made. The stock has since recovered some ground, trading at €1,544.60 — 1.09% higher on the day and about 11.64% below its 52-week peak of €1,748.00 hit on 30 June. By contrast, the Friday close of €1,528.00 had been 12.59% off that record.

Geopolitical headwinds, however, continue to cast a shadow over the rosy narrative. China’s contribution to ASML’s revenue slipped from 19% in the first quarter to 14% in the second, reflecting both softer demand and tightening export controls. The proposed MATCH Act in the United States threatens to further restrict shipments of DUV equipment to Beijing. On the technology front, TSMC’s decision to skip the latest high-NA EUV tools for its upcoming A14 process has raised questions about the near-term adoption of ASML’s most advanced machines. Meanwhile, the Philadelphia Semiconductor Index has fallen more than 20% from its June high, officially entering bear market territory, with a single-month decline of over 18% in July.

For all the sector-wide jitters, ASML’s own fundamentals remain on a firmly upward trajectory. The raised 2026 forecast comes from the company’s own order book and capacity plans, not from ephemeral market sentiment. Whether the stock can reclaim its trillion-dollar market capitalisation — ASML is now roughly $300 billion short of that milestone — will ultimately depend on how sustainably the AI-driven demand for chip fabrication technology translates into real revenue growth in the quarters ahead. For now, the tension between a punishing market rotation and a genuinely stronger business outlook defines the investment case.