ASML shares fell about 8.5% following the company’s second-quarter earnings report. The decline comes as investors assess a complex mix of technical support levels and geopolitical restrictions.
Approximately 14% of ASML's sales came from China in the most recent quarter. This revenue stream faces increasing uncertainty as an unnamed Chinese company backed by the Chinese government has begun manufacturing its own deep ultraviolet (DUV) lithography machines.
ASML is restricted from selling EUV and advanced DUV machines to China and is only allowed to sell older-technology systems. Compounding these existing restrictions, there is a bill in the US Congress to prevent ASML from selling or servicing machines for the first three Chinese companies expected to receive homegrown DUV machines, suggesting that the loss of this revenue stream was likely to occur regardless of the new domestic production.
Despite these challenges, ASML remains the only company in the world that manufactures extreme ultraviolet (EUV) lithography machines. The company has developed next-generation High NA EUV technology and plans to increase its EUV capacity by 30% both this year and next, and likely in 2028 as well.
The cost disparity between technologies remains significant. EUV machines can cost more than $220 million apiece, while DUV machines can cost as little as $5 million, with high-end advanced immersion DUV machines costing around $90 million. Japanese companies Nikon and Canon also supply DUV lithography machines, providing alternative sources for older technology.
Technical outlook and price targets
In currency terms, ASML shares have been pushed sharply toward support at €1,231. In dollar terms, the stock is testing a critical support zone near $1,618. For now, the technical picture remains cautious.
A hold and bounce from $1,618 could offer a tactical entry for those looking to buy the dip. However, failure to maintain support at $1,618 would strengthen the bearish outlook and could lead to a move toward the next significant support near $1,535.
In the short term, ASML's price has some downside potential to complete the current interim correction, with the corresponding low expected to form above support at €1,231. According to technical models, there is a 39% probability that ASML's price could break directly below support at €1,231.
Investors are likely to watch for a recovery above key resistance levels before viewing the recent weakness as a confirmed reversal. Despite the current volatility, the ongoing long-term uptrend for ASML is expected to continue, targeting a move above resistance at €1,741. Disciplined risk management remains essential as volatility persists.