The EUV lithography maker reported strong earnings, however normal fears over the prolonged AI commerce introduced it down.
Shares of key semiconductor gear provider ASML Holdings (ASML 3.90%) fell 11.8% in July, in accordance with knowledge from S&P International Market Intelligence.
ASML makes excessive ultraviolet lithography (EUV) machines essential to creating cutting-edge semiconductors for synthetic intelligence (AI) functions. So expectations had been excessive heading into the month, with ASML up about 40% on the 12 months heading into July.
So when ASML delivered strong however not extraordinary outcomes, buyers felt maybe a bit let down. Across the similar time as its earnings report, July 17, geopolitical issues additionally got here to the fore.
China issues loom amid earnings
Within the second quarter, ASML grew income 10.6% to six.9 billion euros, whereas earnings per share grew 22.9% to 4.93 euros per share. Each numbers got here in forward of expectations. But bookings got here in at solely 4.5 billion euros, beneath general income. That truly marked a rise from the prior quarter, however maybe beneath expectations given the latest explosion of AI demand.
Furthermore, geopolitical issues loomed across the similar time. On the identical day as ASML’s earnings, experiences circulated that the U.S. was contemplating much more export restrictions on chipmaking gear to China. Whereas ASML had already been prohibited from promoting its superior EUV machines to China, China’s Huawei was in a position to produce a 7-nanometer superior chip final 12 months, maybe utilizing much less environment friendly double patterning with ASML’s much less superior deep ultraviolet lithography machines.
So worries abounded that the federal government would clamp down much more on ASML’s China gross sales. Of observe, about 49% of ASML’s income got here from China final quarter, though a lot of that’s for trailing-edge specialty chips that most likely would not be affected. No agency resolution has been made on extra restrictions thus far.
As a cherry on prime, Republican presidential nominee and former president Trump raised issues in an interview with Bloomberg Businessweek, with a press release that implied his backing of Taiwan in opposition to a possible Chinese language invasion wasn’t ironclad. For the reason that majority of modern chips and loads of reminiscence are produced in Taiwan, a possible conflict between China and Taiwan might result in catastrophe for the semiconductor trade and sure the worldwide economic system.
ASML might be a bounce-back candidate
Regardless of these issues, ASML is an indispensable firm with a monopoly on the expertise that makes AI potential. Whereas bookings may be fairly lumpy, ASML has all the time seen 2024 as a digestion 12 months for the trade after clients added loads of capability via 2023. In the meantime, ASML and quite a few different chipmakers are fairly bullish concerning the prospects of 2025. So so long as there aren’t any geopolitical disasters, this pullback in AI winners looks as if a possibility to choose up extra shares.
