ASML's Geopolitical Tightrope: Unproven US Accusations Meet a Fully Loaded Order Book

ASML rejects US allegations of export violations, while China's domestic DUV progress and strong Q2 results keep analysts bullish.

The Dutch lithography giant has become accustomed to living between two poles: Washington's tightening export screws and China's accelerating efforts to build its own chipmaking tools. This week brought fresh evidence that both forces are intensifying simultaneously.

US Commerce Secretary Howard Lutnick has raised concerns in recent conversations with ASML executives that the company may be violating American export controls on China, according to a Bloomberg report published Friday. Lutnick reportedly suggested ASML was not acting in "good faith" — though no evidence was presented to support the claim. ASML rejected the allegations outright and denied rumors of unauthorized EUV machine deliveries to China.

The unsubstantiated nature of the accusations likely limits immediate pressure on the company, but investors are watching communications from both The Hague and Washington closely. The episode follows a late-July report that sent the stock down as much as 7 percent at the time: a state-backed Chinese consortium involving Huawei and SiCarrier had begun producing domestic immersion DUV lithography machines, with five systems slated for delivery to local chipmakers including SMIC this year.

A Widening Technological Gap

For Beijing, that domestic production push represents a prestige victory. For ASML, it validates a long-held assumption: when access to cutting-edge technology is blocked, customers simply build yesterday's technology themselves.

The gap between what China is attempting to replicate and what ASML is already shipping appears to be widening rather than narrowing. In mid-July, the company announced that Intel Foundry is deploying its new High-NA EUV technology in the 18A process for a portion of its Core Ultra Series 3 processors — a milestone ASML itself characterized as a significant proof of production readiness for this next lithography generation.

That technological leadership is reflected in the numbers. Second-quarter net sales reached €9.3 billion with a gross margin of 54.0 percent and net income of €2.9 billion — all exceeding company guidance. The third-quarter outlook calls for revenue between €11 billion and €12 billion with gross margins of 55 to 57 percent. Full-year 2026 guidance was raised to €43–45 billion in total sales at a margin of 54 to 56 percent.

Wall Street Stays the Course

Despite the geopolitical noise, analysts remain largely undeterred. Bank of America Securities reaffirmed its buy rating on Monday with an unchanged price target of €2,452, with analyst Didier Scemama citing ASML's lithography leadership and a productivity roadmap targeting more than 500 wafers per hour by 2028.

Morningstar went further, lifting its fair value estimate for the stock from €1,200 to €1,800, pointing to sustained AI demand that could drive ASML's annual revenue to roughly €70 billion by 2028. Erste Group Bank had earlier raised its earnings-per-share estimate for the current fiscal year to $45.23, with $62.33 projected for the following year, also citing strong demand from AI infrastructure spending.

Capacity Expansion and Capital Returns

The company is simultaneously investing heavily in its future capacity: Low-NA EUV and DUV immersion system capacity is slated to rise about 30 percent in 2027 versus 2026, with a further 30 percent expansion under consideration for 2028.

Shareholders, meanwhile, continue to receive steady returns. Between August 3 and 7, ASML repurchased 266,460 of its own shares at a weighted average price of €1,466.40, totaling €390.74 million. The prior week saw 271,248 shares bought back for roughly €390.5 million — both tranches under the 2026–2028 buyback program. An interim dividend of €1.88 per share was paid on August 5 to shareholders registered as of July 28.

These capital returns carry their own message: a company distributing cash to shareholders while undertaking billion-euro capacity expansions and navigating geopolitical headwinds is not anticipating an imminent demand slump.

A New Challenger Emerges

Beyond the China export questions, a fresh competitive threat has entered the picture. Source Foundry, a semiconductor startup valued at $5 billion and backed by hedge fund Situational Awareness with $500 million, is reportedly developing alternative lithography systems aimed at challenging ASML's dominant position. No tangible product or customer orders have been announced, keeping the immediate competitive risk modest.

The Market's Verdict

The stock has shown resilience amid the headlines. On Tuesday, shares traded at €1,540.20, up 2.20 percent, following gains on Monday when the stock closed at €1,508.60. Last week, ASML advanced 1.90 percent and was counted among European market winners, buoyed by a broader technology sector rally.

The shares still sit roughly 11.89 percent below their 52-week high, reflecting how much ground remains before reclaiming previous peaks despite a substantial recovery from September's lows.

The underlying tension remains unresolved: US lawmakers proposed bipartisan legislation in April that would bar ASML from selling DUV machines to Chinese chipmakers — a move that knocked 6 percent off the stock in a single day. Yet that very restriction policy is what drives China toward building its own, technologically inferior machines. ASML finds itself at an unusual crossroads where tighter Western export controls accelerate Chinese self-sufficiency while simultaneously highlighting just how far the company's lead extends at the actual technological frontier of High-NA EUV.

Whether that lead can still be protected politically — or whether it has already become the company's most valuable asset — may prove a more consequential question in coming quarters than any single revenue figure.