Is the market over-reacting?

One of the semiconductor juggernaut, ASML just reported its earnings. Its second-quarter net income of 1.6 billion euros (down 17.5% yoy) on revenues of 6.2 billion euros (down 10.2% yoy). Next, its closely watched new bookings increased to 5.6 billion euros ($6.11 billion) from 3.6 billion euros in the first quarter of 2024, with about half of that coming from the company's most advanced EUV product lines -- vital in the manufacture of AI chips and smartphones.

Another concern is the prospect of more severe U.S. restrictions on China. The U.S. government is thinking of imposing the most severe trade curbs available if companies including ASML continue to provide China access to advanced semiconductor technology. ASML is being target by the U.S. because it has a monopoly on making some machines which produce the most advanced semiconductors. Particularly, China accounted for 49%, or about €2.33B, of the total net system sales which were €4.76B for the second quarter of 2024. Total net system sales in the country climbed about 20% quarter-over-quarter.

Furthermore, ASML expects third quarter sales to be between €6.7B and €7.3B, missing estimates of €7.5B. For 2024, the company expects similar total net sales with a slightly lower gross margin, relative to 2023.

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Is the market over-reacting? What do you think?

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