Diverging Views on ASML’s Stock Trajectory Amidst Market Volatility

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Shares of the Dutch semiconductor equipment manufacturer ASML faced selling pressure on Friday, contrasting with the sector's generally positive long-term outlook driven by artificial intelligence. Market experts are divided, with some labeling the stock a top selection for 2026 while others advocate for a more cautious stance. Concurrently, reports indicate China is making swifter-than-anticipated progress in its domestic chip development efforts.

During Friday's trading session, ASML's stock declined by 3.74% to $1,080.85 on the NASDAQ. On its home exchange in Amsterdam, shares fell 1.66% to €925.30. This pullback occurred within a broader correction affecting semiconductor equities, which also impacted industry giant Nvidia.

Market nervousness stemmed from a combination of cautious analyst commentary and geopolitical developments. On Friday, Bernstein analyst David Dai reaffirmed his "Hold" rating, attaching a price target of €800—a figure substantially below the current trading level. This followed a move by Zacks Investment Research a day earlier, which downgraded its recommendation from "Strong Buy" to "Hold," further dampening sentiment.

The long-term perspective, however, remains a point of contention. Only days prior, Bank of America had named ASML its "Top Pick" for 2026, citing an expected valuation adjustment and a projected upswing in 2027. In response to the market's concerns, CEO Christophe Fouquet pushed back in Friday interviews. He characterized global AI investments as an "arms race" and dismissed notions of an AI bubble.

Technological Advancements in China Fuel Market Skepticism

Part of the prevailing market skepticism originates from advancements by Chinese chipmakers. SMIC and Huawei are reportedly working on 7-nanometer chips using multi-patterning techniques, achieving this without access to ASML's advanced EUV lithography machines. While ASML's technology remains essential for producing chips below 5nm, these developments demonstrate that export controls are slowing, but not halting, China's semiconductor ambitions.

Meanwhile, a separate debate is gaining attention in the Netherlands. Former ASML CEO Peter Wennink presented a report to the government on December 12, warning of a potential loss of prosperity. His recommendation involves a €150 billion investment in technology and AI infrastructure over the coming decade to maintain competitive standing.

Solid Operational Backdrop with Focus on January Report

Operationally, ASML's position remains robust. For the third quarter of 2025, net bookings reached €5.4 billion, surpassing expectations of €4.9 billion. Demand for its EUV systems continues to be strong, driven by chipmakers ramping up new fabrication plants in the United States and Europe.

The next critical milestone is scheduled for January 28, 2026, when ASML will release its fourth-quarter and full-year financial results. Analysts currently anticipate earnings per share of approximately $8.84 for the final quarter. The average price target among experts stands at $1,149, indicating that a majority are betting the "AI arms race" described by CEO Fouquet will continue to fill the company's order books.