Shares of ASML Holdings (ASML -1.80%) fell 12% this week through Thursday trading, according to data from S&P Global Market Intelligence.

The semiconductor equipment giant, which has a monopoly on crucial EUV technology needed for making advanced semiconductors and memory, sold off along with the sector on Tuesday as economic fears re-emerged.

Adding insult to injury, a Wall Street analyst also downgraded shares on Wednesday, citing too-optimistic growth projections for 2026 and beyond.

UBS sours on the magnitude of ASML's AI lift

On Wednesday, UBS analyst Francois-Xavier Bouvignies downgraded ASML from "buy" to "hold," ending the analyst's bullish call on the stock since August 2022.

Of course, ASML has done quite well over that span, rising some 60% since that time and seeing its valuation rise to 42 times earnings. But Bouvignies suggests that while earnings should continue to grow in the years ahead, he's cautioning they might not grow as fast as ASML's relatively high multiple implies.

Investors anticipate big-time growth for ASML in 2025, and Bouvignies actually agrees with this. Bouvignies even called ASML "one of the best fundamental stories in the European tech sector" in his note.

The problem is that it gets much murkier after that. Bouvignies noted that the move to new gate-all-around transistor structures may require increased intensity of other types of semicap equipment, but not necessarily more EUV lithography steps. And while artificial intelligence will give ASML a boost across logic and memory chips, the analyst estimates AI chips will only account for 10% to 15% of sales after 2025.

The downgrade, when taken together with a tough week for semiconductor stocks overall, as well as the looming risk of potential equipment sales restrictions to China, sent ASML down more than 10% this week.

What to do now

The note was no doubt discouraging, especially as ASML has already sold off 24% from its all-time highs back in July.

The stock's P/E ratio of 42 sits exactly about midway through the range between 25 and 60 experienced over the past three years. So while the dip may look like an opportunity, it's also possible ASML shares could fall further.

Still, if ASML stock were to do so, it would likely be a great buying opportunity, as the company's monopoly on key technology gives it a high-probability path to more earnings growth. While the amount of growth is subject for debate, a dip in P/E below 40 times trailing earnings could prove as low a price as one may get for this premium AI player. And it's also possible AI chip demand could surprise to the upside against Bouvignies' forecast.

Of note, interested investors should tune into the company's upcoming investor day on Nov. 14 for more detail on its long-term earnings model.