ASML Plunges 5.6% Amid China's EUV Breakthrough and Sector Turbulence: What's Next for the Lithography Giant?

Summary
• ASML's stock tumbles to $1,015.31, down 5.64% from $1,076.05
• Intraday range of $1,010.01–$1,065.10 highlights sharp volatility
• China's EUV lithography prototype and sector-wide AI chipmaker competition drive selloff
• Options market shows bearish positioning with high gamma and theta in key contracts

ASML Holding N.V. (ASML) faces a dramatic intraday selloff, dropping over 5.6% as investors react to China's breakthrough in EUV lithography technology and intensifying competition in the AI semiconductor supply chain. The stock's sharp decline from its 52-week high of $1,141.72 to a 12-month low of $578.51 underscores the sector's fragility amid geopolitical and technological shifts. With the options market signaling bearish sentiment and technical indicators flashing mixed signals, the question looms: can ASML's dominance in lithography withstand this new wave of disruption?

China's EUV Lithography Breakthrough Sparks Sector-Wide Jitters
ASML's 5.6% intraday plunge is directly tied to Reuters' exclusive report revealing China's operational EUV lithography prototype, developed by former ASML engineers. This breakthrough threatens to disrupt ASML's 90% market share in advanced lithography, as the prototype—though not yet producing working chips—signals China's accelerated path to semiconductor self-sufficiency. The report highlights reverse-engineering of ASML's EUV technology by Chinese teams, supported by state-backed recruitment of ex-ASML engineers and salvaged components from older ASML machines. Additionally, sector-wide pressure from AI chipmakers like Nvidia and TSMC, who rely on ASML's equipment for advanced node production, amplifies concerns over margin compression and market share erosion.

Semiconductor Equipment Sector Volatility: AMAT and Littelfuse Lag Behind
The semiconductor equipment sector is under pressure, with Applied Materials (AMAT) down 4.26% and Littelfuse (LITR) declining 3.8%. ASML's 5.6% drop outpaces peers, reflecting its unique exposure to EUV technology risks. While AMAT's decline stems from broader AI infrastructure slowdowns, ASML's selloff is more acute due to its monopoly-like position in EUV lithography. The sector's 30-day moving average of $1,053.79 suggests short-term bearish momentum, but long-term fundamentals remain intact given AI-driven demand for advanced chip manufacturing.

Bearish Positioning and Gamma-Driven Options Playbook
• MACD: 20.63 (Signal: 22.93, Histogram: -2.30) indicates bearish crossover
• RSI: 63.02 (neutral) suggests no overbought/oversold extremes
• Bollinger Bands: $959.67–$1,175.15 (current price at lower band) signals oversold territory
• 200D MA: $826.04 (price above) suggests long-term bullish bias
• K-line Pattern: Short-term bearish trend with long-term bullish setup

ASML's technicals present a mixed picture: short-term bearish momentum from the China EUV news clashes with long-term bullish fundamentals. Key support levels at $1,036.31 (30D) and $737.21 (200D) demand attention. The options market reflects bearish positioning, with high gamma and theta in near-term contracts. Two top options for bearish exposure:

• ASML20260130C1020
- Strike: $1,020 | Exp: 2026-01-30 | IV: 0.06% | Leverage: 203,054% | Delta: 0.055978 | Theta: -0.044508 | Gamma: 0.537408 | Turnover: 0
- IV: Low volatility, Leverage: Extreme, Delta: Sensitive to price moves, Theta: High time decay, Gamma: High sensitivity to price changes
- This call option offers high gamma and theta, ideal for short-term bearish bets. A 5% downside to $964.55 would yield a payoff of $55.55 per contract, though low turnover may limit liquidity.

• ASML20260717C1040
- Strike: $1,040 | Exp: 2026-07-17 | IV: 0.20% | Leverage: 203,054% | Delta: 0.009474 | Theta: -0.001675 | Gamma: 0.016219 | Turnover: 0
- IV: Moderate volatility, Leverage: Extreme, Delta: Low sensitivity, Theta: Minimal time decay, Gamma: Low sensitivity
- This deep-out-of-the-money call offers speculative upside if ASML rebounds. A 5% rebound to $1,066 would yield a $26 payoff, but low delta and gamma limit near-term potential.

Trading Insight: Aggressive bears should prioritize ASML20260130C1020 for short-term gamma-driven plays, while long-term bulls may wait for a bounce above $1,067.41 (middle Bollinger Band). Watch for a breakdown below $959.67 to confirm bearish momentum.

Backtest ASML Holding Stock Performance
The backtest of ASML's performance after a -6% intraday plunge from 2022 to the present reveals positive short-to-medium-term gains. The 3-Day win rate is 54.04%, the 10-Day win rate is 53.19%, and the 30-Day win rate is 54.89%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 5.20%, which occurred on day 59, suggesting that while there was some volatility, ASML's stock price was able to recover and even exceed its pre-plunge levels.

ASML at Crossroads: Bearish Near-Term, Bullish Long-Term—What to Watch Now
ASML's 5.6% selloff reflects immediate fears of China's EUV breakthrough but overlooks its long-term dominance in AI-driven chip manufacturing. Short-term support at $1,036.31 and $959.67 will be critical; a breakdown below $959.67 could trigger a 20% correction. Conversely, a rebound above $1,067.41 (middle Bollinger Band) may reignite bullish momentum. Sector leader Applied Materials (AMAT), down 4.26%, highlights broader equipment sector weakness, but ASML's unique EUV exposure makes it a high-conviction trade. Action Step: Short-term bears should target ASML20260130C1020 for gamma-driven plays, while long-term investors may accumulate dips above $959.67. Monitor China's EUV production timeline and U.S. export control responses for catalysts.