(News Bulletin 247) – The Dutch group’s shares fell on Wednesday on the Amsterdam Stock Exchange despite reassuring orders. The outlook for the third quarter is lower than expected and, above all, the United States risks taking sanctions that would penalize its activity.

The second largest market capitalization in Europe, behind Novo Nordisk and ahead of LVMH, ASML is struggling this Wednesday on the Amsterdam Stock Exchange.

A specialist in the design of machines used for photolithography, a technology essential to the creation of semiconductors, the group fell 8% on the Amsterdam Stock Exchange after revealing its second quarter results.

In reality, the accounts published by ASML probably do not explain the fall in the stock. Both revenues, gross profit, operating profit and net profit turned out to be higher than the consensus.

Important point: orders for “EUV” (extreme ultraviolet) lithography tools, the company’s new generation of products, accelerated to reach 2.5 billion euros compared to 656 million euros in the previous quarter.

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The threat of US restrictions

However, the company’s third-quarter outlook is below expectations. ASML expects revenues of between €6.7 billion and €7.3 billion and a gross margin of between 50% and 51%, compared with consensus expectations of €7.5 billion in revenues and a gross margin of 51.5%, according to Stifel.

The group, which describes its 2024 financial year as a “transition”, has nevertheless maintained its target of stable sales in value for the whole of 2024, which will imply a “strong fourth quarter”, notes Invest Securities.

Above all, the fall in the stock is due to geopolitical tensions. The information this Wednesday “on possible new American restrictions on China could spoil the party”, warned Oddo BHF in a note published before the market opened.

Bloomberg reported Wednesday that the Biden administration is considering imposing restrictive measures on companies — the agency named ASML and Japan’s Tokyo Electron — if they continue to provide China with access to advanced semiconductor technologies.

“In search of leverage over its allies, the United States is considering imposing a measure called the Foreign Direct Product Rule (FDPR), people familiar with the recent discussions said,” the agency said.

Trump’s words

“The rule allows the country to impose controls on foreign-made products that use even a small fraction of American technology,” Bloomberg said. The measure would be used to limit the two companies’ operations in China, including reducing their ability to maintain or repair equipment already in the country.

On the Tokyo Stock Exchange, Tokyo Electron closed down 7.5%, a drop almost identical to that suffered by ASML on Wednesday.

China represents a huge market for ASML, with the country accounting for 49% of its system sales in the second quarter, far ahead of South Korea (28%) and Taiwan (11%).

According to Reuters, analysts have linked the fall in ASML’s stock to both Bloomberg’s report and comments by Donald Trump. The Republican presidential candidate told Bloomberg Businessweek that Taiwan “took 100% of our chip business.”

“I think Taiwan should pay us for defense. You know, we are no different from an insurance company. Taiwan gives us nothing,” he added.

But the world’s largest chipmaker, Taiwan’s TSMC, is one of ASML’s biggest customers. TSMC shares fell 2.4 percent on Wednesday on the Taipei Stock Exchange.