US-imposed technology sanctions against China are a constant bugbear for the global semiconductor industry, not least for Dutch lithographic machinery monopolist ASML Holding NV (NASDAQ:ASML), the $350 billion firm selling $370 million shovels.
ASML is virtually the only provider of extreme ultraviolet (EUV) lithography machines, which are essential to the production of silicon-based microchips, in the world.
It is this dominant position in a highly specialised field of cutting-edge technology that has put ASML on track to make between €30 billion and €40 billion in sales in 2025 (per Stifel analysis).
But ASML is also the semiconductor player most at risk of tightening China tech sanctions.
According to Stifel analysts, China is ASML’s largest market, comprising 49% of sales in the second quarter and 20% of ASML’s current backlog.
“Regardless of the bright 2025 outlook for the company, the dominating overhang on the stock for the time being will be risks of additional China sanctions,” said Stifel.
Analysts added: “Amongst our European coverage universe ASML has the highest China exposure which makes it more exposed to potential FDPR (Foreign Direct Product Rule) restrictions than other European semi-cap stocks that have a lower China exposure.”
‘Semi cap’ refers to ‘semiconductor capital equipment’, being the various types of machinery and tools used in the manufacturing and testing of semiconductor devices.
It is because of this exposure that Stifel maintains a hold rating on ASML stock with an €850 price target against an €823.2 publication price.
This is despite ASML shares comparatively underperforming against other chipmaking and chipmaking-adjacent stocks, as recently covered by Proactive.