Investors in the semiconductor industry get revved up about automation, digitalisation and — especially — artificial intelligence. On top of a cyclical recovery, such structural sources of demand are expected to mean an unprecedented chip boom. But geopolitical risk can throw a spanner into even the most powerful engine.
This is the predicament ASML finds itself in. Second-quarter results highlighted the strengths of the Dutch manufacturer of advanced chipmaking equipment. Its clients are thriving as demand for semiconductors recovers. See, for instance, TSMC, whose market value rose to more than $1tn earlier this month. Increasing utilisation of ASML’s machinery translates into higher orders which, at €5.6bn, outpaced consensus expectations. While third-quarter sales look softer, the order book underpins strong growth next year.
Yet ASML’s stock fell more than 10 per cent on Wednesday as investors fretted over reports that the US may consider tougher restrictions on what semiconductor equipment can be sold to China. Those geopolitical fears knocked others in the sector, too. Tokyo Electron, a Japanese equipment manufacturer, fell 7 per cent. TSMC was down 2 per cent as presidential candidate Donald Trump said he thought Taiwan should pay the US for defence.