asml's market position challenged by china's AI breakthrough
Veldhoven, Tuesday, 28 January 2025.
ASML is facing a tough market environment after the emergence of Chinese AI technology. This development, led by the launch of DeepSeek AI’s open-source language model, has sparked concerns over future demand for ASML’s advanced EUV equipment. The news significantly impacted semiconductor manufacturing stocks, causing a decline in share prices for companies like Lam Research, KLA, and ASML. DeepSeek’s rapid development of a high-performing AI model at low cost has reshaped the semiconductor landscape, raising questions about global demand for chips and equipment. With Chinese AI advancements potentially reducing the need for expensive semiconductors, ASML’s order books and market dominance are under scrutiny. Investors are examining whether current stock valuations reflect these risks or present a buying opportunity. Despite recent declines, analysts maintain a positive long-term outlook for ASML, citing its crucial role in semiconductor technology and promising order visibility for 2025.
Market reaction to DeepSeek’s innovation
DeepSeek AI’s breakthrough has sent shockwaves through the semiconductor industry. The Chinese company developed a competitive large language model for just $6 million in two months [1]. ASML’s stock dropped 6.5% following this news, while other industry players like KLA and Lam Research experienced similar declines of 6.3% and 5.6% respectively [1]. Early trading on January 27th showed even steeper losses, with ASML’s shares falling more than 10% [4][5].
JPMorgan maintains optimistic outlook
Despite market turbulence, JPMorgan has maintained its ‘buy’ rating for ASML with a price target of €1,057 [2]. The bank’s analysis suggests ASML’s 2025 order visibility will gradually improve, potentially serving as a positive catalyst for stock performance. Their forecast is based on a price-to-earnings multiple of 32 times the expected 2026 earnings, exceeding ASML’s 10-year average PE ratio of 20-30 [2].
Valuation and growth prospects
Current market metrics show ASML trading at 37.42 times trailing earnings [6], with the stock reaching a low of $671.937 in recent trading [6]. The company’s market capitalization stands at $271.52 billion [6]. While immediate concerns about AI chip demand have impacted valuations, ASML’s projected growth rate of 17% over the next five years [1] reflects ongoing confidence in its technological leadership position [GPT].