ASML's China Risk Gets a Reality Check as Buybacks Mask a Split Institutional Mood

Bank of America reaffirms ASML buy rating with $2,845 target, calling recent China-driven sell-off an overreaction despite geopolitical risks.

The sell-off in ASML Holding shares that followed reports of Chinese progress on domestic lithography equipment looks increasingly like an overreaction, according to Bank of America, which has reaffirmed its buy rating with a price target of $2,845 — implying upside of more than 70 percent from current levels.

The stock had tumbled 5.9 percent in a single session and a further 5 percent the next day after headlines touted advances by Chinese developers working on immersion DUV lithography systems. But the analysts, led by Vivek Arya, argue the actual earnings threat is far smaller than the market's reaction suggests.

China accounts for roughly 20 percent of ASML's revenue, with the region's share of DUV sales projected at 44 percent for 2026. Even in a worst-case scenario where Chinese manufacturers bring up to 20 local ArF immersion tools to market, Bank of America estimates the financial impact at just €1.4 billion — equivalent to 2.4 percent of expected 2027 revenue. The math, in other words, does not support the scale of the recent markdown.

Competition from domestic Chinese players is real but hardly imminent. Local supplier Aishengna is expected to ship just five DUV systems this year, rising to 20 by 2027. ASML alone delivered 131 immersion DUV tools in 2025. Beijing's push for self-sufficiency in chipmaking equipment is a long-term strategic concern, not a near-term threat to the Dutch giant's dominance.

The geopolitical dimension, however, remains a live risk that no earnings model can fully capture. Washington has repeatedly floated pressure on the Dutch government to tighten export restrictions on ASML's China sales, and the political temperature shows no sign of cooling. The calculus is complicated by the fact that US rival Applied Materials is already feeling the sting of Chinese localization rules — new fab capacity must be half-equipped with domestic tools — costing the company an estimated $600 million in the current fiscal year. Meanwhile, Chinese memory maker YMTC is positioning itself to become the world's largest NAND producer by the end of 2027, a potential demand engine that cuts both ways for ASML.

Against this uncertain backdrop, the company's own actions tell a story of quiet conviction. ASML pressed on with its share buyback program through the week of August 17–21, repurchasing between 48,280 and 51,815 of its own shares each trading day at weighted average prices ranging from €1,506.98 to €1,618.13. Daily outlays of €77.3 million to €78.9 million underscore a steady rhythm of capital return, even as the stock has drifted 5.3 percent below its level following the company's guidance upgrade over a month ago.

Institutional investors, meanwhile, are drawing sharply different conclusions. Deutsche Bank cut its ASML position by 44.0 percent in the second quarter, selling 29,272 shares and leaving 37,236 in its portfolio, valued at roughly $74.1 million, according to a regulatory filing with US authorities. On the other side of the trade, several smaller asset managers added exposure. Monetta Financial Services bought 800 shares worth about $1.59 million, making ASML its 28th-largest holding. Lee Johnson Capital Management and Global Retirement Partners also built new or expanded positions during the quarter.

The divergence has yet to move the needle. The stock traded at €1,494.20 on Wednesday, nearly flat against the prior close of €1,495.80, with a modest 0.6 percent decline on the week. At the German trading venue, the shares were last seen at €1,498.60, roughly 14 percent below the 52-week high of €1,748 and 3.2 percent under the 50-day moving average — a pause after a rally that more than doubled the price over twelve months.

Valuation offers some context for the competing views. ASML trades at a price-to-earnings ratio of around 32, well below peers in the photonics and semiconductor equipment space such as Applied Optoelectronics, which commands a multiple above 43. Analysts project revenue growth of over 35 percent this year and earnings growth of about 56 percent — figures that underpin the long-term bull case Bank of America is pressing.

The China debate will likely keep the stock volatile in the near term. But the fundamental reality — ASML remains the sole supplier of cutting-edge EUV lithography systems — is not something a handful of Chinese prototypes changes overnight. For now, the buyback machine keeps running, and the institutional crowd remains split on what comes next.