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earlier, morgan stanley adjusted its rating on asml shares from overweight to equal weight, and lowered its target price from 925.00 euros previously to 800.00 euros.

the investment firm noted that the european semiconductor capital equipment industry could face headwinds, including a spending slowdown, which could weigh on asml’s earnings growth in 2025 and 2026.

asml, known for its semiconductor manufacturing equipment, may face challenges due to the expected decline in dram spending, which currently accounts for about 46% of the company's system sales in the second quarter of 2024. fluctuations in dram spending are an important factor for asml as it can directly affect the company's financial performance.

despite concerns about dram, morgan stanley acknowledged that certain segments within the semiconductor industry are expected to remain strong. high-bandwidth memory (hbm), a portion of dram spending used to produce ai chips, is expected to maintain its strong performance. in addition, investment in new semiconductor nodes, especially those such as tsmc's n2/a16, is likely to continue.

the report also highlights potential risks beyond dram, including issues related to intel’s foundry business and concerns about possible overspending on semiconductor capacity in china. together, these factors could lead to a broader slowdown in expectations for the industry as it approaches 2026.

morgan stanley's adjustment reflects its cautious view on asml, given the broader context of the semiconductor equipment market and its sensitivity to changes in spending patterns within the industry.

in other recent news, asml holding nv has become the focus of several other analysts' rating adjustments. citi has lowered its target price for asml from 1,250 euros to 1,150 euros, while maintaining a buy rating. the adjustment was affected by the slowdown in the industry cycle and the downward revision of intel's capital expenditure forecast.

however, citi's growth forecasts for asml remain strong, thanks to potential growth in artificial intelligence and improvements in tool productivity and lithography intensity.

deutsche bank also cut its price target for asml to 950 euros, citing an expected 22% drop in chinese sales by 2025 due to challenges in the semiconductor market. despite this, deutsche bank maintained its buy rating. similarly, bofa securities revised its price target due to lower earnings forecasts for 2025 and 2026, but also maintained its buy rating.

meanwhile, ubs downgraded asml's stock rating from "buy" to "neutral", and barclays upgraded its rating from "hold to increase" to "overweight". the adjustments are in response to recent developments, including the netherlands' tightening export controls on asml chipmaking equipment to match u.s. restrictions and china's dissatisfaction with these controls. these are the latest developments for asml holding nv.

asml, the risks are growing

the dutch company's order growth last quarter was offset by the possibility of tougher u.s. restrictions on its business in china.

bloomberg news previously stated that the biden administration is considering using the toughest trade restrictions if companies including asml continue to provide advanced semiconductor technology to china.

the united states is targeting asml, which has a monopoly on machines that make the most advanced semiconductors, and is stepping up pressure to curb china’s advances in the industry. the fall came even as the company reported a 54% rise in second-quarter orders to 5.57 billion euros ($6.1 billion) from the previous three months, beating expectations.

however, the geopolitical angle may be more in focus today than earnings, with bloomberg reporting that the u.s. is pressuring asml to impose more restrictions," citi analyst andrew gardiner said in a note. "pressure is increasing to limit service activity on the installed base."

asml expects sales of between 6.7 billion euros and 7.3 billion euros in the current quarter, below expectations for 7.5 billion euros. the company confirmed its previous forecast for flat sales this year before returning to strong growth in 2025.

previous u.s.-led measures targeting asml’s chip exports to china have not dented demand in the asian country. china accounted for nearly half of asml’s second-quarter revenue, with sales in the country up 21% from the previous quarter. beijing has been buying up older equipment without restrictions to make more mature types of semiconductors.

asml is increasingly driven by demand for high-performance chips needed for artificial intelligence applications.

“we are currently seeing strong developments in artificial intelligence, driving recovery and growth across most industries, ahead of other market segments,” chief executive officer christophe fouquet said in the statement.

strong performance from some of asml's largest customers helped support demand for the company's equipment. for example, taiwan semiconductor manufacturing co. said earlier that second-quarter sales grew at the fastest pace since 2022, thanks to an artificial intelligence boom that is driving global data center investment. sales to taiwan rose by 290 million euros in the quarter, and demand for advanced equipment also increased slightly.

last quarter was fouquet's first at the helm of asml, succeeding peter wennink, who retired in april. he has struggled to balance tighter u.s. export controls on china with the need to continue selling equipment in the company's largest market.

u.s. pressure on beijing to slow the pace of semiconductor manufacturing led the netherlands to ban exports of asml's second largest category of advanced machinery, immersion duv lithography machines, to china earlier this year.

however, asml is continuing to service machines purchased before the restrictions were put in place.the biden administration has told allies that if the practice continues it is considering using the foreign direct product rule, which allows the u.s. to impose controls on foreign-made products that use even the smallest amount of american technology, bloomberg reported.

the company said as much as 15% of its chinese sales this year would be affected by export control rules implemented in january. asml has never been allowed to sell its most advanced extreme ultraviolet technology to china.

at the end of august, dutch prime minister dick schoof said that the dutch government would consider asml's economic interests when deciding to further tighten export restrictions on chip manufacturing equipment to china.

schof said that asml represents an innovative industry that is extremely important to the netherlands, "this industry should not be damaged under any circumstances, otherwise it will jeopardize asml's global position."

in recent years, asml has repeatedly expressed dissatisfaction with not getting enough support from the dutch government. its former ceo peter wennink even threatened to consider leaving the netherlands if asml's development in the netherlands continued to be restricted. in addition to its chinese business, the company is also worried that the dutch government's increasingly anti-immigration policies may undermine asml's ability to attract foreign talent. wennink also publicly opposed restrictions on exports to china, warning that they would stimulate china to develop new technologies and pose competition to asml. he said in an interview with bloomberg news last year, "the more pressure you put on them, the more likely they are to redouble their efforts."