ASML share price nosedives due to fear of trade restrictions

Economy•17 Jul ’24 18:25•Adapted on 17 Jul ’24 21:56 Authors: Jorn Lucas and ANP

Chip machine manufacturer ASML has lost tens of billions of euros in stock market value. Investors have pushed the stock down almost 11 percent following it became known that the United States is considering new, stricter trade restrictions on China. About half of the Veldhoven-based company’s turnover comes from China.

ASML share price nosedives due to fear of trade restrictions

6 min 46 sec

According to Bloomberg, the United States is considering imposing the toughest possible trade restrictions on China if companies continue to supply the country with advanced chip technology. These measures would affect ASML, which has become one of the most valuable listed companies in Europe in recent years.

‘The Netherlands has been informed’

According to sources, the US government has also informed the Netherlands regarding the move. Earlier, the Dutch government had already expanded export restrictions for ASML at the insistence of the Americans. The US believes that China might become militarily too strong with modern chip technology.

The Chinese government strongly disagrees with Washington’s stance. A Chinese Foreign Ministry spokesman called on relevant governments on Wednesday to strongly oppose the looming prospect of even stricter regulations around chips.

AMSTERDAM 15-07-24. ASML announces quarterly figures. The chip machine manufacturer’s share price fell on the stock exchange, but expectations are high. ANP/Hollandse-Hoogte/Nico Garstman (ANP / Nico Garstman)

‘Between hammer and anvil’

According to Joost Schmets of the Association of Securities Holders, today it is a kind of groundhog day. The publication of the half-year figures last year was also overshadowed by American restrictions on China. ‘ASML is once more between a rock and a hard place.’

The new restrictions now being discussed would, according to Schmets, concern service contracts and maintenance of machines that have already been delivered to China. ‘But ASML is sticking to its 2025 targets for turnover and profit.’

ASML released its quarterly figures earlier today. The company received significantly more orders from customers, partly due to the rapid development of new applications of artificial intelligence (AI). However, sentiment is currently dominated by the possible new trade restrictions. According to stock market editor Wesley Weerts, the figures were ‘fine’, although they were worse than last year in many areas. The news from the US does not only affect ASML; other companies in the chip sector are also taking a hit. The only exception is Intel, which does a lot in the US itself.

‘Exaggerated’ reaction

The price drop of over 10 percent is ‘somewhat exaggerated’ according to Weerts. ASML’s prospects also play a role. ‘That outlook was disappointing on many points, including the margins.’ Moreover, according to Weerts, the role of China should not be overestimated. ‘If the turnover is not achieved there, it will come from somewhere else. There is so much demand for ASML’s machines.’

In addition, the price of an ASML share recently exceeded one thousand euros. ‘I can also imagine that many investors therefore find it nice for a while and would rather sell something to make a profit.’