ASML’s Unrivaled Lithography Dominance Is Now a Political Target as US Probes EUV Sales to China

ASML's record Q2 sales and raised guidance overshadowed by US allegations of EUV export to China. Stock down 10%. Company denies claim; new bill may restrict DUV sales.

The arithmetic of ASML’s second quarter was simple: record sales, wider margins and a second upgrade to full-year guidance. Yet the stock is trading roughly 10% below its June 30 record of €1,748, and the reason has less to do with chip cycles than with the paperwork of trade enforcement. US Commerce Secretary Howard Lutnick has raised questions about whether one of the Dutch company’s ultra-sensitive EUV lithography systems may have found its way to China – a claim ASML is pushing back on with unusual force.

The semiconductor-equipment giant reported net sales of €9.3 billion for the three months through June, comfortably above the €8.8 billion consensus, with gross margin expanding to 54% and net profit landing at €2.9 billion. The performance was driven by insatiable AI demand across both logic and memory chips, and the company now expects revenue of €43 billion to €45 billion for the full year 2026, up sharply from a prior range of €36 billion to €40 billion. Management also lifted the full-year margin forecast from 51%–53% to 54%–56% and guided for third-quarter sales of €11 billion–€12 billion on a gross margin of 55%–57%. The services business, a steady earnings anchor, delivered roughly €2.8 billion – about €300 million above expectations.

Yet beneath the headline numbers, a political undercurrent is building. Lutnick’s allegation, which has been circulating since June, centres on the possibility that an EUV machine – banned for export to China since the first Trump administration – has been deployed there. ASML’s response was uncharacteristically blunt for a company that usually avoids the political fray: it issued a document titled “No indication of any ASML EUV System in China” and distributed it in Washington. The company notes that of the 314 EUV systems installed worldwide, 26 have been decommissioned, and none sit on Chinese soil. It also points to the sheer logistics – each machine is roughly the size of a school bus, weighs 180 tonnes and requires ongoing maintenance by ASML personnel – to argue that a covert transfer is physically implausible.

The timing is awkward. Even as ASML defends its export compliance record, the US Congress is working on a bipartisan bill that would extend restrictions to less sensitive DUV lithography systems, a market where ASML still sells to Chinese customers. The company expects around 20% of its 2026 revenue to come from already-approved China-related sales, so any additional tightening would translate directly into lost turnover. China’s share of ASML’s system sales already slipped to about 14% in the second quarter because of existing export limits, though the shortfall was more than offset by rising orders from TSMC, Samsung and Intel.

On the production front, ASML is pressing ahead with a capacity blitz that underscores the confidence of its order book. The company has booked EUV orders stretching into 2028 and plans to boost output of its Low-NA EUV tools by 30% next year, with another 30% increase under review for 2028. It has also cut the assembly and test time for its EUV machines by roughly a third and achieved a continuous EUV power output of 1,000 watts. Customer commitments remain large: SK Hynix placed a record $8 billion order for as many as 30 EUV machines over two years, while Intel has started shipping the first high-volume logic chips made on its 18A process using ASML’s High-NA EUV technology – the Panther Lake processor.

The analyst community responded with a flurry of price-target upgrades. Bernstein set the highest bar at €2,500 with an outperform rating, while Bank of America raised its target to €2,452 and Citi lifted to €2,200, citing an AI-driven investment cycle that could boost ASML’s earnings by 25% to 52%. Berenberg and Kepler Cheuvreux targets climbed to €2,100 and €2,300 respectively, and a Seeking Alpha contributor increased his target to $2,510 while noting risks from customer delays, export controls and slower High-NA adoption. Jefferies stayed on the sidelines with a hold rating and a €1,560 target.

The stock closed the week at €1,568, still up 55.54% year-to-date but 3.84% lower than 30 days ago. The broader semiconductor sector has been heavy: the Philadelphia Semiconductor Index fell 4.3% in a single session on worries about capital spending after TSMC’s earnings, and memory plays like SanDisk and Western Digital slumped. With a relative-strength index of 50.7, ASML’s shares sit in neutral territory – a market that believes in the AI-driven lithography boom but is pricing in the headline risk from Washington. Whether the stock reclaims its June high depends less on the next quarterly order number and more on how the Lutnick probe and the DUV bill play out in the weeks ahead.