ASML Shares Face Scrutiny Amid China Supply Chain Reports

Shares of Dutch semiconductor equipment giant ASML found themselves in a delicate position on Wednesday. The market mood was dampened by a report from Dutch media, which alleged the company had supplied equipment to Chinese firms with military connections. While the stock experienced some immediate pressure, analysts from firms like Goldman Sachs pushed back, maintaining that the long-term growth narrative for the chip toolmaker remains intact.

Despite the unsettling headlines, ASML received public support from Wall Street. Goldman Sachs reaffirmed its "Buy" rating on the stock just yesterday, citing a price target of 1,200 euros. This stance suggests that major investors view the current controversy as a temporary disruption rather than a fundamental threat to the company's business model.

The underlying sensitivity of the market is clear. China accounted for approximately 36 percent of ASML's sales in 2024. Consequently, any development that might tighten the so-called "Silicon Curtain" is watched with intense focus. Investor nervousness was reflected in the share price, which closed at 958.00 euros, pulling back slightly from a recently achieved 52-week high.

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

The Core Allegations and ASML's Response

The source of the uncertainty is an investigation by the Dutch news program Nieuwsuur. According to the report, ASML sold deep ultraviolet (DUV) lithography systems in 2024 to Chinese entities linked to the defense sector. Specifically named were a subsidiary of the state-owned China Electronics Technology Group Corporation (CETC)—known for producing missile systems and drones—and the Shenzhen International Quantum Academy.

ASML issued a swift and firm defense. In a statement, the company emphasized that the deliveries involved "older technology" that was not subject to export restrictions at the time of sale. ASML assured stakeholders it has complied strictly with all applicable laws. Furthermore, it stated the supplied equipment is technically incapable of manufacturing the most advanced chips, a crucial detail in the ongoing trade tensions.

Looking Ahead: Regulatory and Market Risks

For shareholders, attention now turns to potential political repercussions in The Hague. Should the Dutch government decide to tighten export licenses for older DUV systems as a consequence of these reports, revenue forecasts for 2026 might require revision. In the near term, the upcoming interest rate decision from the U.S. Federal Reserve is also expected to influence the valuation of highly-rated technology stocks like ASML.