ASML Surges Amid U.S.-China Trade Tensions: A 4-Day Rally of 7.19%

On September 26, ASML surged by 4.19%, marking a four-day gain of 7.19%. During recent trading, the Dutch semiconductor equipment manufacturer has seen its stock climb steadily, resonating with market optimism despite broader economic challenges.

During his visit to Washington, Dutch Minister of Economic Affairs, Dirk Berjaarts, underscored China's significance as a trade partner, particularly emphasizing that ASML should be allowed to operate with as much freedom as possible. This stance was reiterated following the Dutch government's decision, under U.S. pressure, to intensify export controls on advanced semiconductor manufacturing equipment.

Berjaarts reassured that maintaining Dutch enterprises' global operational flexibility is a crucial responsibility of the government, treating China as critically important alongside the U.S. and other nations. He clarified that his meeting with U.S. Commerce Department Deputy Secretary, Don Graves, aimed to enhance bilateral trade, not negotiate export restrictions, highlighting ASML's significant market presence in China, Taiwan, and South Korea.

China's market is particularly vital for ASML, contributing nearly half of its sales in 2023, making it the company’s second-largest revenue source. Analysts warn that complying with U.S. demands could inflict substantial financial damage on ASML, given its dominant role in high-end chip manufacturing equipment. Potential export restrictions might lead to losses of around $2 billion if its immersion DUV lithography machines are barred from the Chinese market. New CEO, Christophe Fouquet, has been striving to balance American export regulations with maintaining relations with China.

Faced with potential tighter U.S. restrictions, ASML's business outlook appears uncertain. The company has forecasted third-quarter sales between €6.7 billion and €7.3 billion, below the market's expectation of €7.5 billion. While concerns persist over weakening demand in the memory chip market, some institutions remain cautiously optimistic. For instance, Morgan Stanley expects ASML to continue benefiting from strong demand in AI and from TSMC, urging caution against premature pessimism over ASML’s future.

As global semiconductor supply chains tighten, the Dutch government's approach underscores its strategy to maintain a delicate balance between fostering ties with key economic partners like China while upholding strategic alliances with countries like the U.S. This commitment reflects the Netherlands’ role as a critical player in the semiconductor industry and its determination to protect its economic interests despite geopolitical pressures.