Key Updates
ASML shares have advanced +3.74% since the August 6 report, rising from $1,678.22 to the current $1,740.99. This extends the V-shaped recovery from the July 27 low of $1,593.24, which was triggered by reports of Chinese state-backed mass production of domestic DUV lithography tools. The stock has now recovered the entirety of that drawdown and moved into new recovery highs, gaining 6.87% over the past five trading days and 2.15% in the most recent session alone, indicating accelerating upward momentum rather than mere stabilization.
Current Trend
ASML is up 62.73% YTD and 23.21% over six months, confirming a robust primary uptrend that has absorbed the late-July China competition scare. The 1-month return remains slightly negative (-1.56%), reflecting the residual drag from the July 27 selloff, but this figure is now being overtaken by the sharp rebound of the past week. Key reference levels: support at $1,593.24 (July 27 low) and $1,638–$1,678 (intermediate consolidation zone from early August reports); resistance is likely near the pre-selloff highs implied by the ~70-80% YTD gains reported in Amsterdam-listed shares prior to the July 27 pullback. The current price structure — higher lows and accelerating daily gains — favors continuation of the uptrend rather than a fade.
Investment Thesis
The core thesis remains anchored on ASML's monopoly in EUV lithography and near-monopoly in advanced DUV systems, both indispensable to the AI-driven chip capacity buildout at TSMC, Samsung, Intel, SK Hynix, and Micron. Following the Q2 print, ASML raised FY guidance twice to €43–45 billion in sales (54–56% gross margin) and outlined plans to expand EUV capacity by 30% in both 2027 and 2028, alongside a projected 75% increase in memory-related revenue this year. Morningstar's upward revision of fair value to €1,800 (from €1,200) reflects materially improved long-term earnings power, with 2028 revenue potentially reaching €70 billion. The primary risk to the thesis is the gradual erosion of ASML's China revenue base (29% of 2026 sales) via export restrictions and nascent domestic DUV competition.
Thesis Status
The thesis remains intact and has been reinforced by price action. The market's swift rejection of the China DUV competition selloff — with shares recovering from $1,593 to $1,741 in under two weeks — suggests investors view the domestic Chinese threat (5 units in 2026, ~20 in 2027) as immaterial relative to ASML's 131 immersion DUV shipments last year and its EUV monopoly. Fundamental catalysts (raised guidance, Intel's High-NA EUV adoption, capacity expansion plans) continue to outweigh the competitive risk narrative in price terms. No changes to the fundamental growth thesis are warranted at this stage.
Key Drivers
Recent price action has been shaped by: raised FY26 guidance to €43–45 billion in sales with 54–56% gross margin, driven by AI-related demand (Reuters, CNBC); the Q2 earnings beat with €9.33 billion revenue and €2.92 billion net profit (Financial Times); the July 27 selloff on reports of Chinese domestic DUV mass production (Bloomberg, Morningstar); Intel's deployment of ASML's High-NA EUV machine (Bloomberg); and Morningstar's fair value upgrade to €1,800 (Morningstar).
Technical Analysis
ASML has staged a sharp V-shaped recovery off the $1,593.24 support established on July 27, advancing roughly 9.3% over approximately two weeks. The pace of gains is accelerating — +2.15% intraday, +6.87% over five days, +3.74% since the last report — signaling renewed buying pressure and a likely resumption of the pre-selloff uptrend. The negative 1-month return (-1.56%) is a lagging artifact of the late-July drawdown and is being overwritten by the current rally. Absent a new resistance level being tested, the immediate technical bias is bullish, with the July 27 low now established as key support for the near term.
Bull Case
- ASML holds an effective monopoly in EUV lithography and over 80% share in DUV, positioning it as an indispensable supplier to the AI chip buildout, underpinning raised FY26 guidance of €43–45 billion in sales (Reuters, CNBC).
- Morningstar raised its fair value estimate to €1,800 from €1,200, projecting ~€70 billion revenue and €69 EPS by 2028 on a 28% sales CAGR through 2028 (Morningstar).
- Intel's deployment of ASML's most advanced High-NA EUV machine confirms commercial readiness and broadening industry adoption of next-generation lithography (Bloomberg, Financial Times).
- Management plans to expand EUV output by 30% in both 2027 and 2028, with memory-related revenue projected to grow 75% this year, indicating a multi-year capacity-driven growth runway (Morningstar).
- Sustained AI infrastructure investment has fueled speculation ASML could become Europe's first trillion-dollar company, with market capitalization already near $700 billion (Reuters).
Bear Case
- A Chinese state-backed firm has begun mass-producing domestic immersion DUV lithography tools, directly threatening ASML's market share in China, which accounted for 29% of 2026 sales (Bloomberg, Morningstar).
- Export restrictions and an expected structural decline in Chinese sales are already weighing on ASML's delivery pipeline (Morningstar).
- Uncertainty persists over whether hyperscalers such as Google and Amazon will sustain current capital expenditure levels, alongside execution risk across ASML's supply chain and key customers like TSMC and Samsung (Reuters).
- UBS analysts flagged continued investor skepticism regarding the sustainability of AI-related capital spending and tightening export controls as ongoing overhangs (CNBC).
- Morningstar's bear-case scenario models a stall in growth and capacity digestion in 2029-30, with 2029 EPS falling to €57 versus a €77 base case, implying a valuation reset to the €1,100–€1,400 range (Morningstar).