Shares of ASML Holding NV plummeted 5.02% intraday on Monday, reversing earlier gains as investors reacted to a report that a Chinese state-backed company has started manufacturing deep ultraviolet (DUV) lithography machines used in chip production.

The drop was triggered by an article from The Information, which highlighted the potential threat to ASML's business in China—a market that accounted for 29.1% of its sales last year and 36.1% in 2024. While ASML's most advanced extreme ultraviolet systems are subject to export controls, the company has been free to sell less sophisticated DUV machines to Chinese customers. The emergence of a domestic Chinese competitor raises concerns about future demand and market share.

The decline erased pre-market gains that had been supported by broader semiconductor sector strength and bullish analyst outlooks. ASML's stock moved sharply lower after the news broke, reflecting investor anxiety over the long-term growth prospects in one of its key markets.