Why J.P. Morgan Says the ASML Stock Selloff is 'Disproportionate'

Dow Jones
07/28

ASML Holding stock tumbled Monday after reports said a Chinese state-backed company is mass-producing chip-making machines. J.P. Morgan says the steep decline is unwarranted.

Shares of ASML, which manufactures chip-making equipment, dived 5.8% to $1,654.62 on Monday. The selloff was triggered by reports that an unnamed Chinese company is mass producing immersion deep ultraviolet lithography machines, a key type of technology used in chip production.

Shares of ASML's peers also fell: KLA Corp. was down 5.1%, Lam Research dropped 6.8%, and Applied Materials fell 5.6%.

J.P. Morgan analyst Sandeep Deshpande wrote Monday that ASML's sharp stock drop "seems disproportionate."

Deshpande noted that China has manufactured lower-end lithography equipment for several years "without any impact on ASML's market share in front-end production."

He added ASML still holds a significant edge in production capabilities compared with Chinese counterparts. For this reason, Deshpande sees the share price drop as a "sentiment-driven" move, meaning investors are selling on the headline but not based on any fundamental changes to the business.

While the firm says investors overreacted to the report, the analyst added that the reports were an indication that China's artificial-intelligence "self-sufficiency" story is solidifying.

"It raises the long-term risk to ASML's China revenue," Deshpande wrote.

The stock market debut of Chinese memory chip maker ChangXin Memory Technologies ( CXMT) in Shanghai on Monday also rippled through U.S. markets. ChangXin stock surged 466% on its first day of trading, inspiring declines in U.S. chip stocks.

Sandisk stock plummeted 13%, making it the worst performer in the S&P 500.

Western Digital, Marvell, Advanced Micro Devices, and Intel all booked declines.

Write to Kit Norton at kit.norton@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

 

(END) Dow Jones Newswires

July 27, 2026 15:44 ET (19:44 GMT)

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