Why ASML Stock Lost 18% in July
Key Points
ASML sold off at the beginning of the month on reports that Anthropic was going to launch its own AI chip.
The company beat estimates in its second-quarter earnings report, which briefly lifted the stock.
Towards the end of the month, a report on new competition from China weighed on the stock.
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Shares of ASML (NASDAQ: ASML) were pulling back last month amid a broader sell-off in AI stocks and as the company reported second-quarter earnings, which briefly lifted the stock, though that wasn't enough to drive gains over the course of the month.
According to data from S&P Global Market Intelligence, the stock finished the month down 18%. As you can see from the chart below, the stock fell early in the month on competitive concerns, and then slipped again at the end of July on reports that China is making its own ultraviolet lithography machines, potentially competing with ASML.
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ASML data by YCharts
What happened with ASML
Like other AI stocks, ASML kicked off the month with a sharp sell-off on news that Anthropic is doing early stage work on its own AI chip, according to The Information, though the inclusion of ASML in the broaders chip sell-off was odd.
ASML is a maker of extreme ultraviolet (EUV) lithography machines, which are used to make the most advanced chips, so it doesn't have the same exposure to that competition that a chipmaker would. However, investors may be betting that Anthropic could put pressure on ASML's customers, such as Micron, by hurting demand, which would in turn hit ASML's business. The stock fell 7.4% on July 1 on the news.
On July 15, ASML gained 2.2% after reporting second-quarter earnings that topped guidance on both the top and bottom lines. Revenue came in at 9.33 billion euros, up 21.2% from the quarter a year ago, and earnings per share improved from 5.90 euros to 7.58 euros.
The company also raised its revenue guidance for the full year from 36 billion-40 billion euros to 43 billion-45 billion euros, showing momentum starting to build. It also added Intel Foundry as a customer for its High NA EUV.
Finally, at the end of the month, the stock sold off on reports in The Information that China is making competing deep ultraviolet machines, sending the stock down 5.8% on July 27. ASML shares fell over the next two days before bouncing on July 30, when Ken Griffin's Citadel bought Situational Awareness's AI stock portfolio after that hedge fund faced a margin call.
Image source: Getty Images.
What's next for ASML
As an equipment maker, ASML hasn't seen the same sales jump as chipmakers, but the year-end revenue guidance uptick signals it's starting to benefit from those tailwinds.
The longer the AI boom continues, the more ASML should benefit as chip foundries like TSMC, Intel, and others expand production and invest in new machines.
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Jeremy Bowman has positions in ASML, Micron Technology, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Intel, Micron Technology, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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