ASML’s Shanghai Rivalry Narrative Fades as Analysts Circle a Discounted Semiconductor Bellwether

The lithography giant’s shares have spent the late-summer months oscillating between two competing narratives: a headline-grabbing competitive threat out of Shanghai and a fundamental picture that, by most measurable metrics, remains firmly intact. Investors who sold on the former are now being told by a chorus of sell-side voices that they may have overreacted.

At the heart of the recent volatility sits Shanghai Yuliangsheng, a Chinese enterprise linked to both Huawei and SiCarrier, which according to a Bloomberg report has commenced series production of immersion DUV lithography systems. The company’s stated ambitions — roughly five units in 2026 and about twenty by 2027, targeting 28-nanometer single-exposure manufacturing — initially rattled a market unaccustomed to seeing ASML’s technological moat challenged. The equipment has been undergoing testing at SMIC since September 2025, with Hua Hong Semiconductor and ChangXin Memory Technologies named as prospective customers.

Yet context matters. ASML’s own delivery schedule calls for approximately 130 immersion DUV tools in 2026, with capacity slated to expand by another 30 percent the following year. The Dutch company ships hundreds of lithography systems annually. Twenty Chinese-built scanners, even if they arrive on schedule, barely register against that scale of output. What unsettled investors more than the raw numbers was the composition of the Chinese machine — most components now come from domestic production, with only a handful of imported parts — signaling that Beijing’s push for technological self-sufficiency continues unabated despite export controls.

The market’s initial reaction was severe. A late-July session saw the stock shed as much as 8 percent in a single day, and the shares subsequently drifted to levels that have left them roughly 17 to 19 percent below the 52-week high of EUR 1,748.00 reached at the end of June. The stock has traded around EUR 1,419.60 in recent sessions, with a seven-day decline of 3.2 percent and a monthly loss of 2.8 percent. Technical indicators suggest the selling may have run its course — the Relative Strength Index sits at 38.4, a zone often associated with oversold conditions, though that alone rarely marks a turning point.

The distance from the stock’s annual low of EUR 628.20 underscores how far the shares have traveled, and the current pullback has drawn a notable defense from the analyst community. Bank of America characterized the late-August sell-off as unjustified and reaffirmed ASML as a top pick in the sector, echoing a view expressed on August 25 that the valuation discount lacked merit. UBS followed suit on August 31, maintaining a buy rating with a price target of EUR 2,452, while Barclays, DBS and Bernstein all confirmed their positive stances during August.

Should investors sell immediately? Or is it worth buying ASML Holding?

The fundamental data gives those calls substance. ASML’s second-quarter results, published on July 15, showed net sales of EUR 9.3 billion — landing above the top end of the company’s own guidance — with a gross margin of 54 percent that also exceeded expectations, helped by margin-rich service components. Net profit came in at EUR 2.9 billion. Management’s outlook for the third quarter points to net sales between EUR 11.0 billion and EUR 12.0 billion with gross margins in the 55 to 57 percent range. For the full year 2026, the company raised its revenue forecast to EUR 43–45 billion with gross margins of 54–56 percent, underpinned by robust customer demand.

Operationally, the pipeline looks equally encouraging. ASML expects to ship around 65 low-NA EUV systems in 2026, representing EUV system revenue growth of more than 45 percent year over year. The company also confirmed that Intel has deployed High-NA EUV technology in production — Intel Foundry has commenced mass production of select Intel Core Ultra Series 3 processors on its 18A node using ASML’s next-generation lithography equipment — a milestone that validates the commercial viability of the newest platform.

Management has backed its confidence with capital returns. The company repurchased shares worth EUR 1.1 billion under its 2026–2028 buyback program, with transactions reported on August 3, August 10 and August 31. An interim dividend of EUR 1.88 per share was also declared for August. These actions signal that the board views the current share price as undervaluing the business.

The next inflection point arrives on October 14, when ASML reports third-quarter results before the market opens. Between now and then, the stock’s trajectory will likely hinge on whether investors can look past the Shanghai headlines and focus on the delivery schedule, the margin profile and the order book — the metrics that have historically mattered most for this company.