The global AI boom has handed ASML a strong tailwind — in its latest quarter, the world’s leading chip-equipment supplier posted orders above market estimates. Yet behind that success lies growing uncertainty: ASML’s guidance suggests demand from China could weaken sharply in 2026. In short, the AI gold rush is real — but the China story is starting to dim.
AI Investments Fuel Order Strength
In its third quarter, ASML secured €5.40 billion in net bookings, a touch higher than the €5.36 billion analysts had forecast. That may seem like a marginal beat, but in the capital-intensive world of lithography tools, every incremental order counts.
What’s pushing the strength? Broadening AI demand. ASML’s CEO, Christophe Fouquet, noted that buyers tied to both advanced logic (think processors) and memory — key components in AI systems — are accelerating commitments. As hyperscalers and chipmakers gear up for new AI datacenters, demand for ASML’s lithography systems becomes more strategic than ever.
Even in segments that had slowed earlier — like mature DUV (deep ultraviolet) systems — ASML is finding pockets of opportunity, especially as some customers hedge against future export curbs.
In short: the AI rush is real, it’s global, and ASML’s order book is a direct beneficiary.
China: From Key Market to Headwind
But momentum in one area doesn’t erase weakness in another. ASML is warning that China — historically a major source of sales — may become a drag in 2026.
China accounted for nearly one-third of ASML’s tool sales in the first nine months of 2025. But going forward, ASML expects “customer demand in China to decline significantly.” The company’s caveat: 2026 total net sales may not drop below 2025 levels, but that hinges on strength elsewhere.
What’s behind the softness? A few converging pressures:
- Export controls and geopolitical friction. U.S. controls on chip equipment exports to China place a cloud over future sales.
- Rare earth and material supply risks. China dominates rare-earth processing, vital for ASML’s machines. Tighter Chinese export rules could squeeze supply.
- Stockpiling vs consumption. Some U.S. lawmakers had flagged potential Chinese customers hoarding equipment ahead of tighter restrictions. ASML counters that the systems shipped are in active use, not sitting idle in warehouses.
So while China remains a big piece of the puzzle, it’s now the puzzle’s fragility.
Balancing Opportunity and Risk
1. 2026 Guidance Upgrades or Cuts
ASML’s current messaging is cautious. Investors will parse any 2026 outlook updates (planned for January) for confidence or cracks.
2. EUV / High-NA Progress
Next-generation EUV (extreme ultraviolet) tools and the push into High-NA lithography remain ASML’s growth lever. Success there could mitigate weakness in other segments.
3. Memory Segment Strength
Demand for memory (e.g. DRAM) tied to AI workloads can help buffer against softness in logic or China tooling.
4. Supply Chain & Material Risks
If rare earth bottlenecks intensify, the ripple effects could affect ASML’s delivery timelines and margins.
5. Geopolitical Shifts
U.S.–China tech tensions, additional export curbs or retaliatory policies could reshape ASML’s addressable market quickly.
What It Means for Stakeholders
- Investors: The strong order beat is a green light in the near term. But elevated valuation multiples now mean any hint of softness — especially in China — will be under harsh scrutiny.
- Competitors & OEMs: The gap in cutting-edge lithography remains wide. Rival toolmakers can’t easily catch up, which keeps ASML in a strong defensible position.
- China and Domestic Firms: Chinese chipmakers may refocus on older or alternative toolsets, or accelerate local self-sufficiency efforts.
- Supply Chains / Materials: Success for ASML partly hinges on continued access to rare earths and critical materials beyond China.
Final Take
The global AI rush is giving ASML a burst of momentum. It’s riding that wave with order strength and optimism. But beneath the surface lies a growing wrinkle: China, once a reliable growth engine, is now a source of uncertainty.
ASML’s ability to lean into advanced EUV development, diversify its customer base, and manage geopolitical and supply chain risks will define whether this quarter’s win leads to sustained outperformance — or an overreach.
