Despite reporting solid earnings, the EUV lithography maker faced challenges due to general fears surrounding the extended AI trade.
ASML Holdings, a key semiconductor equipment supplier, saw its shares fall by 11.8% in July. ASML specializes in extreme ultraviolet lithography (EUV) machines that are essential for producing cutting-edge semiconductors used in AI applications. The company had a strong start to the year, with shares up about 40% heading into July.
However, when ASML’s earnings report came in with solid but not exceptional results, investors may have felt slightly disappointed. The geopolitical landscape also added to the uncertainty, with reports emerging on July 17 about potential export restrictions on chipmaking equipment to China.
China Concerns and Earnings Performance
Despite ASML’s revenue growing by 10.6% to 6.9 billion euros in the second quarter, there were concerns about bookings falling below overall revenue, possibly reflecting lower-than-expected demand for AI-related semiconductor equipment. Geopolitical tensions regarding China also played a role, as the possibility of further restrictions on ASML’s sales to the country loomed.
ASML generates about 49% of its revenue from China, but it primarily focuses on trailing-edge specialty chips that may not be directly impacted by potential export restrictions. Additionally, comments made by former President Trump about Taiwan added to the overall uncertainty in the semiconductor industry.
ASML’s Future Prospects
Despite these challenges, ASML remains a crucial player in the semiconductor industry with a monopoly on AI-enabling technology. The company anticipates 2024 to be a year of industry adjustment after significant capacity additions by clients through 2023. Looking ahead, ASML and other chipmakers are optimistic about the opportunities in 2025, barring any major geopolitical disruptions. This dip in AI-related stocks could present an opportunity for investors to consider adding ASML shares to their portfolio.
