ASML's Two-Front Battle: Washington's Unproven Claims Meet Amsterdam's Raised Ambitions

ASML lifts 2026 revenue forecast to €43-45B, but shares stay 14% below record amid US-China export control dispute and shrinking China sales.

The gap between what ASML's management is saying and what its share price is doing has rarely been wider. The Dutch lithography giant lifted its 2026 revenue forecast to €43–45 billion from a prior range of €36–40 billion, a meaningful upgrade that implies roughly 16 percent growth at the midpoint alongside an improved gross margin outlook of 54 to 56 percent. Yet the stock remains nearly 14 percent below its late-June record high, a disconnect that investors are now weighing against a fresh geopolitical headache from Washington.

That headache arrived Friday, when Bloomberg reported that US Commerce Secretary Howard Lutnick had told ASML executives he believed the company was not acting in "good faith" regarding US export controls on China. No evidence was presented, and ASML has categorically denied both the allegations and rumors of unauthorized EUV shipments to Chinese customers. The exchange underscores how the company's near-monopoly on extreme-ultraviolet lithography — the technology without which advanced AI chips cannot be made — has made it a lightning rod in the broader US-China technology standoff.

The China Question Cuts Both Ways

The political noise lands at a moment when China's importance to ASML's revenue mix is already shrinking dramatically. Sales to China have fallen from 41 percent of total revenue in 2024 to just 16 percent in the first half of 2026. Part of that reflects a deliberate strategic pivot: Shanghai Aishengna has begun building its own immersion DUV systems, and a new Chinese regulation now requires domestic fabs to source 50 percent of their equipment locally. Rather than defend the shrinking mid-tier DUV market, ASML appears to be accelerating toward the high end, planning a 30 percent increase in EUV capacity for 2027 and 2028.

The calculus is straightforward. China may be closing the gap on older DUV technology, but ASML remains untouchable in EUV and High-NA EUV systems — the latter already in use by Intel for its upcoming Panther Lake processors. The declining China share looks less like a loss than a deliberate trade: less volume in the mass market, more margin-rich business with Western and Taiwanese customers.

Investors have been here before, and the memory is fresh. Late July, a report that a state-backed Chinese firm had begun mass production of immersion DUV systems knocked 7 percent off the share price in a single session. This time around, the market's reaction has been more muted — the stock closed Monday at €1,508.60, up 1.90 percent on the week — suggesting that the unsubstantiated nature of Lutnick's remarks has limited their immediate impact.

Wall Street Isn't Flinching

The geopolitical static has done little to cool analyst enthusiasm. Bank of America Securities reaffirmed its buy rating on Monday with a price target of €2,452, with analyst Didier Scemama citing ASML's technology leadership and a productivity roadmap targeting more than 500 wafers per hour by 2028. Morningstar went further, lifting its fair value estimate from €1,200 to €1,800 on the strength of AI demand that could drive annual revenue to roughly €70 billion by the end of the decade. Erste Group Bank had already raised its earnings-per-share estimates on August 5, projecting €45.23 for the current fiscal year and €62.33 for the next, again pointing to the AI infrastructure boom.

The demand signals underpinning those calls are hard to argue with. TSMC, ASML's most important customer, reported a 44.7 percent year-over-year revenue increase for July. Memory chip demand is accelerating too, with ASML guiding to 75 percent segment growth in 2026. As the sole supplier of the lithography systems that make cutting-edge AI chips possible, the company is effectively a toll booth on the AI highway.

Buybacks and Dividends Signal Confidence

Management's own actions reinforce the bullish narrative. Between August 3 and 7, ASML repurchased 266,460 of its own shares at a weighted average price of €1,466.40, a total outlay of €390.74 million. That followed the prior week's buyback of 271,248 shares for roughly €390.5 million, both executed under the 2026–2028 repurchase program. The company has also been buying stock at average prices up to €1,506.07, a signal that management considers current levels attractive. Early August brought a first quarterly dividend of €1.88 per share to shareholders on record as of July 28.

Reading the Technical Picture

At €1,507, the stock sits in neutral territory. The 14-day relative strength index reads 50.5 — neither overbought nor oversold — while the share price holds a comfortable 23.41 percent above its 200-day moving average, suggesting the long-term uptrend remains intact despite short-term softness below the 50-day average. The year-to-date gain stands at 63.54 percent, and over twelve months the stock is up 142.71 percent. It remains roughly 13.70 percent below its 52-week high.

A New Challenger Emerges

Beyond the China question, 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 ASML's dominant position. No tangible product or customer orders have emerged yet, keeping the immediate competitive risk modest — but the mere existence of a well-funded challenger adds another variable to an already complex equation.

The competing forces at work — unproven political accusations, a shrinking but strategically managed China exposure, robust analyst support, aggressive capital returns, and a distant but credible startup threat — make ASML a study in how geopolitical risk and fundamental demand strength are being weighed against each other in real time. With a market capitalization of €575.77 billion and a clear path toward record revenue in 2026, the current pullback from June's peak increasingly looks like a consolidation phase rather than the start of something more ominous. The coming quarters will test whether that assessment holds, but for now the evidence tilts toward the bulls.