Semiconductor capital equipment shares swung from a pre-market high to a sharp sell-off on Monday after The Information reported that a Shanghai-based, state-backed company has started mass-producing homegrown immersion DUV lithography machines. ASML, Applied Materials, Lam Research and KLA Corp were all down roughly 7% at their intraday lows. Analysts at BofA, JPMorgan and BNP Paribas then argued the reaction went too far, and the stocks pared losses into the close.
Semiconductor capital equipment stocks took a U-turn on Monday, swinging from AI-driven euphoria to geopolitical panic in a matter of hours. At their intraday lows, ASML, Applied Materials, Lam Research and KLA Corp were all down roughly 7%. The synchronized sell-off wiped billions from the sector's market value within minutes.
The trigger was a report from The Information: a Shanghai-based, state-backed company, incorporating teams from startups such as Yuliangsheng Technology, has started mass-producing homegrown immersion DUV lithography machines. It intends to produce 5 DUV tools this year and 20 next year for domestic customers including SMIC, CXMT and Hua Hong.
Washington's MATCH Act meets a domestic Chinese tool
Before that headline, the sector was riding a pre-market high on easing geopolitical tensions in Iran and a Wall Street Journal report that Nvidia is in talks to guarantee $250 billion in financing for an OpenAI data center project. That momentum evaporated instantly.
The report arrives as the U.S. Congress advances the MATCH Act, legislation aimed at blocking China from buying or servicing these exact DUV machines. If China can build them domestically, impending U.S. restrictions may lose their teeth entirely. The market's initial logic ran down the rest of the chain: if Chinese engineering has conquered the lithography bottleneck, deposition, etching and inspection are highly vulnerable to replacement too.
Losses narrow into the final hour
Bleeding slowed as trading entered the final hour. ASML traded down 5.75%, and Applied Materials was down 4% heading into the close. Lam Research was off 4.5% and KLA Corp traded down 3%.
Wall Street analysts drove the afternoon recovery, arguing that the market is conflating a prototype milestone with an imminent commercial threat.
Analysts push back on the panic
BofA's Didier Scemama reiterated a Buy rating and a €2,452 price target, calling the threat to ASML modest because China's leading domestic player, SMEE, has yet to demonstrate high-volume production at 28nm or below. According to BofA, in leading-edge Chinese manufacturing "even modest reductions in scanner performance could materially lower yields and increase cost per die" — and ASML's NXT:1980Fi already delivers 330 wafers per hour.
Scemama calculated that even if China sources 20 domestic tools next year, ASML sales would drop by an estimated €1.4 billion, or 2.4% of projected group sales. JPMorgan's Sandeep Deshpande called the reaction disproportionate, stressing that yield, overlay, throughput and reliability over thousands of wafer runs are what matter. He acknowledged long-term risks to ASML's China revenue while calling mid-term earnings intact.
BNP Paribas' Jakob Bluestone framed the development as a small negative, pointing out that ASML's demand far outstrips its available supply. DRAM capacity growth in China alone is projected to add more than 500,000 wafer starts per month before 2030, a scale-up requiring several hundred ArFi tools. On that arithmetic, Bluestone argued, local Chinese lithography manufacturing is a likely necessity rather than a total replacement of ASML's business.
Source: Investing.com
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