ASML and TSMC Face Geopolitical Challenges Amid Strong Earnings

ASML shares plunge as geopolitics overshadow strong earnings

The Dutch chip equipment maker, ASML, reported better-than-expected earnings for the second quarter. However, its shares plunged due to stricter US export curbs on exports to China. Europe's largest tech firm, ASML, reported second-quarter earnings that surpassed market expectations. However, the Netherlands-based company was hit by stricter US chip export restrictions on China just before its earnings release. As a result, its shares plunged 11% to €871 per share on Wednesday, marking the sharpest one-day drop since March 2020 and wiping out €42.7 billion of its market value. Following a growth slump in the first quarter, the Dutch semiconductor machinery manufacturer ASML reported net bookings of €5.6 billion in the second quarter, up 24% from a year ago. This key metric for ASML's performance significantly exceeded the estimated €5.04 billion, reflecting a 12% year-on-year growth. Meanwhile, its net sales reached €6.24 billion, down 9.5% from the same quarter last year but surpassing analysts' expectations of €6.08 billion, or a decline of 12%. Net profit was recorded at €1.58 billion, with a gross margin of 51.5%, beating the expected 50.6%. CEO Christophe Fouquet, who replaced the former CEO Peter Wennink, maintained the outlook of a "transition" year in 2024 and expects the semiconductor industry to continue recovering in the second half. He stated: "We currently see strong developments in AI, driving most of the industry recovery and growth, ahead of other market segments...The industry expects to be in a cyclical upturn in 2025. As a result, we need to prepare for a number of new fabs that are being built today across the globe." ASM''s major customers are well-known chipmakers, including TSMC, Intel, and Samsung. TSMC is a Taiwan-based chip manufacturer that supplies advanced computer chips to tech giants like Apple and Nvidia. The firm specialises in manufacturing lithography systems, complex equipment that helps make circuitry of AI-related chips. Sales to Taiwan increased by €290 in the second quarter. Despite a strong earnings result, ASML provided weaker-than-expected forecasts for the current quarter, expecting net sales of between €6.7 billion and €7.3 billion, lower than the estimated €7.6 billion. The more restrictive China export curbs by the US might affect its outlook, as China accounted for 49% of its total sales in the first half of the year, up from a 39% market share in the final quarter of 2023. Sales in China may be affected by US export restrictions aimed at curbing China's ability to advance technology for military use, or so-called "national security" concerns. According to Bloomberg's report, the Biden administration is considering a more restrictive trade policy on companies such as ASML, which have continued to supply China with older generations of computer chips used for cars and appliances. The US may impose direct controls on foreign-made products using even minimal American technology. Previous export curbs on China did not stop semiconductor machinery firms from selling their lower range of products to the country. ASML's sales to China rose by 21% in the second quarter from the previous quarter, even though its cutting-edge technology, Extreme Ultraviolet (EUV), did not receive any orders from the country. The slump in ASML shares also followed the global trend, as the semiconductor sector experienced a broad selloff, with Nvidia slumping 6.7%, AMD plunging 10.2%, Applied Materials sliding 10.5% on Wall Street, and the Japanese rival, Tokyo Electron shedding 7.5%, while British firm Arm's shares were down 5%. The tech selloff was also partially caused by profit-taking in blue chips as small-caps saw a surge this week amid growing bets for the US Federal Reserve to commence an imminent rate cut in September. The European Central Bank's rate decision on Friday will be critical for the European markets, as the bank is expected to keep the interest rate unchanged this time. The Euro Stoxx 600 fell 0.43% as the tech sector was down 4.4%, dragged by the global trend on Wednesday.

ASML falls as outlook clouded by risk of US export restrictions - ExBulletin

(Bloomberg) -- ASML Holding NV fell as the prospect of tighter U.S. restrictions on its China operations offset growth in orders from Dutch companies in the latest quarter. Bloomberg's most read articles The Biden administration is considering using the toughest trade restrictions available if companies like ASML continue to give China access to advanced semiconductor technology, Bloomberg News reported Wednesday ahead of the company's second-quarter earnings release. The United States is targeting ASML, which holds a monopoly on manufacturing machines that produce the most advanced semiconductors, as it steps up pressure to stem Chinese advances in the semiconductor sector. Shares fell even as the company said its bookings rose 54% in the second quarter from the previous three months to $5.57 billion ($6.1 billion), beating estimates. The geopolitical angle is likely to be more in focus today than the results, however, with Bloomberg reporting that the U.S. is pushing for additional restrictions on ASML, Citi analyst Andrew Gardiner said in a note. Pressure is mounting to restrict service activity on the installed base. ASML shares fell 11% in Amsterdam on Wednesday to 870.90 points after the Bloomberg report, wiping $42.7 billion ($46.7 billion) off its market value. It was the biggest drop since March 2020. ASML forecast revenue of $6.7 billion to $7.3 billion for the current quarter, below the $7.5 billion forecast. The company reaffirmed its previous forecast of flat sales this year before returning to strong growth in 2025. Previous U.S. measures targeting ASML chip exports to China have not dented demand in the Asian nation. China accounted for nearly half of ASML's revenue in the second quarter, and sales there rose 21% from the previous period. Beijing has been buying older kits without restriction to make more mature types of semiconductors. ASML is increasingly driven by demand for high-power chips needed for AI applications. "We are currently seeing strong developments in AI, which is driving most of the recovery and growth in the sector, ahead of other market segments," CEO Christophe Fouquet said in the statement. Impressive results from some of ASML's biggest customers have helped support demand for the company's equipment. Last week, Taiwan Semiconductor Manufacturing Co. said second-quarter sales grew at their fastest pace since 2022, driven by the AI boom that is fueling data center investment worldwide. Sales in Taiwan rose by 290 million in the quarter, as demand for edge equipment also edged up. The story continues The latest quarter was ASML's first under Fouquet, who took over when Peter Wennink retired in April. He has been trying to balance the U.S. push to tighten export controls on China with the need to keep selling equipment in the company's largest market. Pressure from the United States to slow Beijing's advances in semiconductor manufacturing led the Netherlands to ban exports to China of ASML's second most advanced class of machines, DUV immersion lithography machines, earlier this year. However, ASML continues to supply machines purchased before the restrictions were put in place. The Biden administration has indicated to allies that it is considering using the Foreign Direct Products rule, which allows the U.S. to impose controls on foreign-made products that use even the smallest amount of American technology, if such practices continue, according to the Bloomberg report. The company said up to 15% of sales to China this year would be affected by export control rules imposed in January. ASML has never been allowed to sell its most advanced extreme ultraviolet technology to China. What Are The Main Benefits Of Comparing Car Insurance Quotes Online

TSMC, ASML In Geopolitical Crosshairs

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy. This was not supposed to happen. The ongoing rush for AI GPUs was supposed to keep investors focused on ASML's soaring order book for its cutting-edge chip manufacturing machines, and TSMC in the limelight as the largest contract chip manufacturer in the world. Yet, geopolitics has a uniquely disruptive way of upending even the most pristine of bullish cases. TSMC is scheduled to provide its quarterly earnings update tomorrow. Meanwhile, ASML has just delivered a pristine financial result for the second quarter of 2024, handily beating expectations for its top-line and bottom-line metrics. The only chink in the armor: a relatively soft guidance for the third quarter of 2024. Critically, China still accounts for 41 percent of ASML's total sales. While US sanctions and export restrictions prevent ASML from selling its cutting-edge EUV and High-NA EUV lithography machines to Chinese tech companies, the current scope of restrictions do not extend to the older Deep Ultraviolet (DUV) lithography machines. This brings us to the crux of the matter. TSMC and ASML shares are tanking today primarily due to the bipartisan geopolitical headwinds emanating out of the US. First, Trump has indicated that he would only offer protection to Taiwan as the President of the US if the Asian island nation pays the US for that safety net. On the heels of this development, we now have reports that suggest the Biden administration is mulling the imposition of strictest possible chip-related sanctions on China by leveraging the Foreign Direct Product Rule (FDPR), which gives the Department of Commerce's Bureau of Industry and Security the authority to regulate the re-export of items that incorporate US intellectual property. Specifically, the Biden administration is considering banning ASML and Tokyo Electron from servicing equipment already sold to China. These restrictions will also preclude any commercial avenue that might still exist between TSMC and Chinese entities. Interestingly, these developments come as a separate report has identified export restrictions-evading culprits closer to home. Specifically, the Information is now reporting that the cloud units of Google and Microsoft are currently playing an important role in helping Chinese companies circumvent US restrictions. It would be interesting to see TSMC's quarterly financial earnings tomorrow. As we recently reported, the largest contract chip manufacturer in the world has slashed prices for its 7nm node-based process by around 10 percent to spur demand. Concurrently, TSMC has negotiated a substantial price increase for its in-demand 3nm-based node process. TSMC shares closed today at a loss of around 2 percent. In contrast, ASML shares are currently down around 10 percent.

Chipmaker's results this week are critical for the semi sector: analysts By Investing.com

A Mizuho analyst stated that the semiconductor sector faces a critical test this week, with the upcoming developments likely to shape its future trajectory. The investment bank highlighted several factors, which could potentially impact companies like ASML Holding NV (AS:ASML) ADR (NASDAQ:ASML), Tokyo Electron Ltd. (TYO:8035), BE Semiconductor Industries NV (AS:BESI), ASM International NV (AS:ASMI), and others. Firstly, Mizuho's report points out that the U.S. government is considering further restrictions on semiconductor equipment sales to China. This includes non-U.S.-made tools from companies such as ASML and Tokyo Electron. "US government wants to do anything and everything they can to hurt China domestic advanced semi manufacturing and evolution," the analyst said. "No talk of lagging edge equipment restrictions or further export bans for US semi-cap equipment suppliers. This looks and feels like Biden wanting to look tougher against China into election and the DNC next month," they added. The restrictions would likely affect ASML significantly, especially given that 49% of their Q2 revenues came from China, albeit not from their EUV equipment. ASML's recent earnings report, while showing strong Q2 results, provided underwhelming guidance for Q3. Despite beating Q2 expectations, the Q3 outlook fell short, largely due to revenue recognition timing. "ASML reiterated the prior CY24 and CY25 revenue guides, so the weaker Q3 is pure revenue recognition timing," the analyst noted. The press on tighter U.S. restrictions into China for semiconductors has overshadowed these results, contributing to a sell-off in the sector. Moreover, Mizuho reflected on former President Donald Trump's recent comments in a Businessweek interview, which raised concerns about U.S. defense commitments to Taiwan. Trump suggested that Taiwan should pay the U.S. for its defense, a statement that rekindled investor fears regarding Taiwan Semiconductor Manufacturing Company (TSMC) and the broader geopolitical tensions. "All this does is raise past concerns amongst investors on TSM from China invasion or disruption risk. These concerns were high in 2023, but faded as AI strength and growth has over-shadowed all this geo-political risk," Mizuho's analyst commented. "I think Trump forgets that anything happens to TSM in Taiwan and no one gets a new iPhone or Macbook and new Samsung (KS:005930) / Android handsets also sort of disappear. Might anger the US electorate a bit, right. And US cloud companies get no GPUs or AI silicon either." On the flip side, the analyst also highlighted the potential beneficiaries of the U.S. restricting semiconductor equipment sales to China, most notably Intel (NASDAQ:INTC) and Texas Instruments (NASDAQ:TXN) as possible "winners." Despite this, they retain a cautious stance on these names. "I am not a buyer of either really on any of this, especially INTC. MU [Micron] heavily US based, but down 4% as part of the AI semi unwind." Overall, Mizuho stressed that all of the aforementioned factors place a lot more emphasis on how TSMC's upcoming earnings results and guidance. More importantly, the manufacturer's commentary on AI, broader foundry market trends, pricing trends, capital expenditure, and non-AI order trends, will be essential. "How TSM stock trades tomorrow will be critical for the next move in semi sector," the analyst emphasized. "Anything negative or worrisome accelerates the de-risk trade in my view." "And to be honest, the de-risk trade in semis could be much more a factor rotation out of Tech winners YTD and into rate-sensitive laggards." The weakness in Nvidia (NASDAQ:NVDA) is particularly telling, as all checks on their fundamentals remain strong, yet the stock has been grinding lower on days when non-tech sectors rally.

Chip stocks tumble on fears of tighter US curbs on sales to China

July 17 (Reuters) - Shares of chipmakers fell more than 4% before the bell on Wednesday amid reports of possible tighter restrictions on supply of advanced technology to key market China and comments on Taiwan from Republican presidential nominee Donald Trump. The U.S. has told allies it is considering using the most severe trade curbs available if companies continue giving Beijing access to advanced semiconductor technology, Bloomberg News reported on Tuesday. U.S.-listed shares of the Dutch chipmaking equipment provider ASML Holding fell about 8% despite beating second-quarter profit estimates following the report. Restrictions already in place have dented U.S. chipmakers' sales to China. Nvidia's revenue from China stood at about 18% of its total revenue in the quarter ended April 28, compared to 66% in the year-ago period. Shares of AI heavyweight Nvidia fell close to 4% premarket. Smaller rival AMD shed 3.5% and Qualcomm and Arm Holdings' were both down about 4%. Amplifying the worries, former U.S. President Donald Trump told Bloomberg Businessweek that Taiwan should pay the U.S. for its defense as it does not give the country anything, sending TSMC's U.S.-listed shares down 5.4%. TSMC is the dominant maker of advanced chips used in everything from AI applications to smartphones and fighter jets, and analysts believe any conflict over Taiwan would decimate the world economy. Chip stocks have rallied this year as investors bet on generative artificial intelligence and the hardware that supports it. Nvidia's shares have more than doubled in value so far this year while AMD has gained about 20%. (Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sriraj Kalluvila)

AI Earthquake: Semiconductors suffer worst selloff in years as US chip exports to China tighten - ExBulletin

The semiconductor sector is facing one of its worst trading days in years, driven by investor concerns about the Biden administration's potential tightening of regulatory restrictions on chip exports to China. The iShares Semiconductor ETF (NYSE:SOXX) was down 5.4% by 12:20 p.m. ET, heading for its worst session since October 2022. Similarly, the VanEck Semiconductor ETF (NYSE:SMH) was down 5.5%. Chart: Chipmakers suffer worst day since October 2022 Image: Benzinga Pro The Biden administration is considering imposing the toughest trade restrictions if chipmakers continue to give China access to advanced semiconductor technology, Bloomberg News reported Wednesday. Dutch chipmaker AMSL Holdings NV (NASDAQ:ASML) appears to be the prime target of these increased U.S. chip restrictions. China has been ASML's largest market over the past four quarters, with second-quarter sales up 21% from the prior period to 2.3 billion euros ($2.5 billion). ASML's U.S.-listed shares fell more than 11%, marking the biggest daily drop since March 19, 2020, when shares fell 19% due to COVID-related lockdowns. Savita Subramanian, an equity analyst at Bank of America, warned that excessive regulation could jeopardize the United States' technological leadership. The government is aware of this and will likely aim to maintain its technological dominance, she added. Subramanian said it was "unlikely" that regulatory risks would erode U.S. tech companies' competitive advantage in AI. "The pullback and risk-off trading into the July earnings season is good in my view to lower expectations and raise the very positive positioning/sentiment level of investors in the semi-metallic commodities sector," said Peter Tchir, strategist at Academy Securities. Semiconductor stocks fell 5.6% on Wednesday, with Advanced Micro Devices Inc. (NASDAQ: AMD) down 7.6%, as AMD notably tested support above its 50-day moving average. U.S.-listed shares of Taiwan Semiconductor Manufacturing (NYSE: TSM) fell 6.2% after reports that U.S. presidential candidate Donald Trump suggested Taiwan should reimburse the U.S. for its defense. British chipmaker Arm Holdings plc (NASDAQ: ARM) fell 8%. Other stocks, including Marvell Technology, Inc. (NASDAQ: MRVL), Lam Research Corporation (NASDAQ: LRCX) and Applied Materials, Inc. (NASDAQ: AMAT), saw losses of more than 7%. Qualcomm Inc. (NASDAQ: QCOM) and Broadcom Inc. (NASDAQ: AVGO) fell 6%. In contrast, Intel Corp (NASDAQ:INTC) and Texas Instruments Inc (NASDAQ:TXN) were the only major chipmakers trading in the green, up 2.4% and 0.7%, respectively. Read now: Bank of America analysts stick to December rate cut forecast, brace for S&P 500 turmoil over election Image via Shutterstock. What Are The Main Benefits Of Comparing Car Insurance Quotes Online

Nvidia and other chip stocks are falling on trade tensions and Trump's Taiwan tough talk

Shares of several global chipmakers, including Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC), fell Wednesday as investors responded to potential new Biden administration export controls and comments on Taiwan by former President Donald Trump. The market impacts of both pieces of news were swift. Here's where each major chipmaker's stock stood Wednesday morning: The double-whammy to the stocks came late Tuesday, after Bloomberg reported that the Biden administration is considering severe trade restrictions if firms like Tokyo Electron and ASML Holding continue to provide China access to their advanced semiconductor technology. The so-called foreign direct product rule (FDPR), would represent a significant crackdown on the sharing of American technology with the country. The rule applies to chips with even the smallest sliver of American-made technology, and would impact U.S. and non-U.S. companies. Hours earlier, the former president and Republican presidential nominee told Bloomberg Businessweek in a wide-reaching interview that he believes Taiwan should pay the U.S. for its defense. "Taiwan doesn't give us anything," he said. Trump also claimed that Taiwan has taken "about 100%" of America's semiconductor business. Hsinchu, Taiwan-based TSMC is the world's largest chipmaker, manufacturing an estimated 90% of the world's most advanced chips that power everything from iPhones to artificial intelligence models. Given Taiwan's outsized role in the global chip industry, questions about U.S. defense of the democratically governed island amid a surge in military activity by China are particularly worrisome. "If China was to invade, that would shut down and create an economic crisis," House Foreign Affairs Committee Chairman Michael McCaul said after leading a bipartisan delegation to Taiwan in May.

What's Going On With Nvidia, AMD And Semiconductor Peer Stocks On Wednesday? - NVIDIA (NASDAQ:NVDA), Advanced Micro Devices (NASDAQ:AMD)

Trump's demand for TSMC to compensate U.S. defense intensifies market jitters, driving chip sector decline. Chip stocks led by Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD are trading lower Wednesday as the U.S. intensified semiconductor sanctions against China, followed by Presidential candidate Donald Trump's attack against crucial contract chipmaker Taiwan Semiconductor Manufacturing Company TSM. The Biden administration is contemplating using the Foreign Direct Product Rule (FDPR), which allows it to impose controls on foreign-made products that incorporate even minimal amounts of American technology, Bloomberg reports. The U.S. has presented this possibility to officials in Tokyo and The Hague. Also Read: Nvidia's Growth Soars Despite French Investigation and Investor Skepticism Additionally, the U.S. is considering further sanctions on specific Chinese chip companies. The U.S. semiconductor companies have significant exposure to China. Prior reports indicated Nvidia could sell $12 billion of AI chips in China this year despite U.S. export controls. Meanwhile, former President Donald Trump has triggered jitters in the semiconductor sector with the latest remark. The key Nvidia supplier, Taiwan Semiconductor, is trading lower on Wednesday after Trump said that the contract chipmaker should compensate the U.S. for its defense. Trump suggested this during a Bloomberg Businessweek interview on June 25, which was published on Tuesday. The broader chip sector is trading lower Wednesday, including Broadcom Inc AVGO, Qualcomm Inc QCOM, Arm Holdings Plc ARM, Micron Technology Inc MU, Marvell Technology Inc MRVL, Microchip Technology Inc MCHP, STMicroelectronics Inc STM, ON Semiconductor Corp ON, GlobalFoundries Inc GFS, United Microelectronics Corp UMC, Skyworks Solutions Inc SWKS. Investors can gain exposure to the semiconductor sector through ProShares Ultra Semiconductors USD and Invesco PHLX Semiconductor ETF SOXQ. Price Actions: NVDA shares traded lower by 4.02% at $121.28 at the last check on Wednesday. Also Read: AMD Showcases New AI Capabilities with Ryzen AI Chips: Report Photo by Tatiana Popova and rawf8 via Shuttterstock Market News and Data brought to you by Benzinga APIs

Nvidia, TSMC, ASML stock price: Why are chip shares down today? - Fast Company

Share prices in major semiconductor companies are down across the board in premarket trading this morning. That includes shares in Taiwan Semiconductor Manufacturing Company (TSMC), which fabricates the chips used in Apple's iPhones, and Nvidia Corporation, which makes the chips that power AI platforms like ChatGPT. As of the time of this writing, Nvidia shares (ticker: NVDA) are down over 4% in premarket trading to $121.25. Taiwan Semiconductor shares (ticker: TSM) are down over 5% to $176.50. Advanced Micro Devices shares (ticker: AMD) are also down over $4.5% to 169.34. Why are chip stocks down? There are two likely culprits. In an interview with Bloomberg Businessweek, former president Donald Trump, who is vying to regain the presidency this November, was asked if he would defend Taiwan against an invasion by China.