Chinese advancements in semiconductor technology are intensifying concerns about high valuations in global markets, as the country approaches series production of deep ultraviolet (DUV) lithography machines.
Sadi Kaymaz noted that the main pressure in markets stems from rising concerns about financing and returns on AI investments. He added that every DUV machine China manufactures is perceived as a loss for the West, though production of five machines in the short term will not alter the global order.
According to Kaymaz, China's DUV machines produce thick beams and cannot create fine patterns in a single pass, making 3nm or 2nm production very difficult. However, China has been able to produce 7nm chips using modified Dutch DUV equipment.
Despite the headline impact, Kaymaz described the effect of China's DUV news on memory chip maker stocks as limited and marginal. Yet broader market declines were steep: Broadcom shares fell 20.5%, Intel 18.3%, Micron 25.4%, and Arm Holdings 20.5% over the last five trading days. South Korea's Kospi index dropped about 21% in the same period, while SK Hynix and Hanmi Semicon slid 30.9% and 23% weekly, respectively.
Analysts attribute the sell-off partly to portfolio rotation from semiconductor stocks into defensive sectors, as well as heightened concerns about the sustainability of high valuations amid a massive AI investment wave — intensified by recent developments in China.
For context, ASML sold 131 DUV systems last year, highlighting the scale of the incumbent industry that Chinese production is trying to challenge.