Dutch technology giant ASML Holding NV (NASDAQ:ASML)’s valuation was severely punished when reports of a ramping up of existing microchip export restrictions to China emerged from the US on Wednesday.
ASML’s share price flopped 11% by the closing bell, effectively wiping US$50 billion of value from the company.
As the leading supplier of extreme ultraviolet (EUV) lithographic machinery to the semiconductor industry, ASML is highly exposed to semiconductor industry headwinds, but a knee-jerk reaction of this magnitude is wholly unnecessary, according to Citi analysts.
Citi’s head of European technology equity research Andrew Gardiner called it a “material overreaction” that it implies ASML would see a third of its China business at risk.
While harsher sanctions “would have significant knock-on implications for the rest of the industry”, Gardiner suggests the risk factor is closer to “a low single digit percent of sales”.
“While shares may remain out of favour for the near-term given geopolitical risk, we see a very attractive valuation for those with patience,” he added.
ASML shares fell another 2% today, adding further support to Citi’s thesis that the market’s overreaction represents “a long-term buying opportunity”.