Shares of ASML Holdings (NASDAQ: ASML), the world's largest provider of semiconductor manufacturing equipment, were moving higher today. They were buoyed by an analyst upgrade last night, news that it could be excluded from U.S. chip export restrictions on China, and a broad surge in chip stocks, following a strong earnings report from Advanced Micro Devices.
As of 10:18 a.m. ET on Wednesday, the stock was up 7.4%.
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ASML bounces back
July has been a rough month for ASML. The stock tumbled in its earnings report earlier this month even as it beat estimates. Fears of restrictions on chip exports to China from the Biden administration have weighed on the stock, and investors appear to be rotating out of chip stocks and into small caps.
This morning, ASML got some good news, with Reuters reporting that the Biden administration is planning to exclude ASML from new export restrictions on China. That's a boon for ASML because close to half of its sales come from China.
And chip stocks were up broadly on AMD's report after the chipmaker posted 115% revenue growth in the key data-center category, boosting investor confidence in the artificial intelligence boom.
Last night, Barclays also raised its rating on ASML from equal weight to overweight, saying that the earlier sell-off in the stock was overdone. That note seemed to come out before the Reuters report.
What's next for ASML
Even after today's gains, ASML seems to offer an attractive entry point. It trades at a price-to-earnings ratio of less than 30 based on 2025 earnings because it's expected to enter a new cycle of growth later this year driven by new extreme ultraviolet (EUV) lithography machines.
ASML has significant competitive advantages because it's the only manufacturer of EUVs, which can create intricate patterns on silicon wafers needed for microchips, and the stock looks well positioned for long-term gains, especially if the company is excluded from the new export rules.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Advanced Micro Devices. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.
