ASML at center of semiconductor trade tensions

What happened: On July 6, ASML Holding NV shares plummeted after The Information reported that a Chinese state-backed company aims to produce deep ultraviolet (DUV) lithography machines this year, challenging ASML's dominance. Bank of America (BofA) later downplayed this threat, calling it "modest." Dutch Trade Minister Sjoerd Sjoerdsma's visit to China, starting July 6, further highlighted ASML's central role in semiconductor trade tensions.

Market impact: The semiconductor sector, particularly ASML, was affected. ASML shares broke below the 50-day moving average, their steepest decline in over a year. The potential supply of DUV machines from China could disrupt ASML's market dominance, impacting its valuation and revenue growth. However, BofA's assessment suggests limited immediate threat.

What to watch next: ASML's Q2 2022 earnings report, scheduled for July 28, will provide insights into the company's response to this development and its impact on financials. Additionally, monitor Dutch-Chinese trade negotiations, as Minister Sjoerdsma's visit could yield updates on ASML's trade status. Lastly, watch for any further announcements or developments from the Chinese company aiming to produce DUV machines.