ASML Holding NV (NASDAQ:ASML) shares have plummeted more than 7% despite rallying in the pre market on a bumper second-quarter financial update.
Sales in the quarter surged 18% as the Dutch lithographic machinery supplier to the cutting-edge semiconductor manufacturing industry benefited from an ongoing boom in artificial intelligence microchip demand.
But ASML’s valuation proceeded to fall sharply, alongside other large-cap chipmaking stocks.
AI chip titan Nvidia Corp is down 3.2% in the pre market; competitor Advanced Micro Devices, Inc is down 3.5%; and the Taiwan Semiconductor Manufacturing Company (the world’s largest semiconductor manufacturer) fell 2.3% in Taipei.
The sudden fall in chip stocks coincides with news that president Joe Biden is considering ramping up existing microchip export restrictions to China.
According to a Bloomberg report, the Biden administration is frustrated with companies that continue to skirt existing sanctions.
If reports are accurate, the US government is considering imposing the ‘foreign direct product rule’ (FDPR), which extends the reach of US export control laws to include certain products made outside the US.
FDPR is designed to prevent foreign companies from bypassing US export controls by using US-origin technology or software outside the country, meaning that even if the manufacturing process occurs entirely overseas, the resulting products could still be controlled under US export regulations.
Chinese tech sanctions, which are designed to hobble the country’s adoption of military-grade AI technology, have bipartisan support from both sides of the US political class.
It means that, regardless of the November election outcome, these restrictions will continue to cast a shadow over the microchip industry in years to come.