The Dutch technology leader ASML, which commands the global market for semiconductor manufacturing equipment, finds itself navigating increasingly complex geopolitical waters. Recent allegations suggest the company has supplied hardware to Chinese research entities with direct ties to the nation’s military. This development highlights a critical tension for the firm: its substantial reliance on the Chinese market, which continues to generate billions in revenue despite tightening export controls.
Strategic Investment and Market Reliance
For investors, the timing of these reports is particularly sensitive. China represents far more than just a customer; it is a fundamental revenue driver. In the 2024 fiscal year, approximately 36% of ASML’s total sales—roughly €10 billion—originated from the Chinese market. Financial analysts anticipate that China will continue to contribute over a quarter of the company’s earnings in 2025. The prospect of heightened political pressure and stricter sanctions in response to these revelations could jeopardize a significant portion of this income stream.
Concurrently, ASML is making aggressive moves to fortify its technological leadership and diversify its strategic footing. In September 2025, the conglomerate finalized a €1.3 billion investment in the French artificial intelligence startup Mistral AI. This deal secures ASML an approximate 11% stake and is aimed at integrating advanced AI models into its own lithography systems to further enhance chip manufacturing efficiency.
Allegations of Military Connections
According to an investigation by Nieuwsuur, ASML has sold technology to end-users closely linked to China’s defense industrial base. A primary focus is the 24th Research Institute under the state-owned China Electronics Technology Group (CETC), a major supplier to the Chinese military for systems including missiles and drones.
A further point of contention involves the delivery of a deep ultraviolet (DUV) lithography machine in February 2024 to the Shenzhen International Quantum Academy. The Dutch Military Intelligence and Security Service (MIVD) has warned that quantum sensor technology researched at the academy holds potential military applications, such as submarine detection. The report also references sales to SiEn and a subsidiary of SMIC, China’s largest chipmaker.
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Company Response and Regulatory Questions
ASML has firmly denied any wrongdoing. The company emphasizes its strict adherence to all applicable export control laws. It states that the delivered goods consisted of older, generic parts and materials that did not require an export license and could not be used to produce cutting-edge, high-performance semiconductors.
Management’s argument is clear: assessing national security risks is the responsibility of governments, not private suppliers. Nevertheless, these events raise questions about the effectiveness of current U.S. and Dutch sanction regimes and their enforcement mechanisms.
Investor Perspective and Outlook
Despite these emerging risks, ASML’s share price has shown resilience, trading near €950 and remaining just below its 52-week high of €976.60. The equity is priced at a forward price-to-earnings (P/E) ratio of around 40, a premium valuation that leaves little room for operational disappointments.
The fundamental growth narrative, powered by the global AI infrastructure boom, remains intact. However, the political risk profile has become more tangible with these new allegations. Investors must now weigh whether ASML’s dominant market position is sufficient to offset potential regulatory tightening around its crucial Chinese operations.
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