Shares of top semiconductor equipment makers, like Applied Materials (AMAT) and ASML Holding (ASML), fell before recovering after a U.S. House committee accused them of helping China grow its chip industry and support its military. More specifically, the committee said that companies such as ASML, Tokyo Electron (TOELF), KLA (KLAC), and Lam Research (LRCX) made large profits by selling tools to Chinese state-owned and military-linked firms, according to Bloomberg.
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While the panel didn’t accuse the companies of breaking any U.S., Dutch, or Japanese laws, the claims led to fears of new export restrictions. In fact, the House panel urged the Trump administration to expand its bans and licensing requirements on chip tool exports to China. Although the committee cannot enforce rules itself, its recommendation could influence future actions from the U.S. Commerce Department and add pressure to an industry that’s already caught up in U.S.-China tensions.
The committee also warned that China’s progress in chipmaking could threaten U.S. national security and accused these companies of selling directly to Chinese groups that build chips for military use. Interestingly, ASML, which is the only company in the world that makes advanced lithography machines used for high-end chip production, has never sold its most advanced tools to China due to U.S. restrictions. Still, China is ASML’s second-biggest market and made up 27% of sales last quarter.
Which Chip Stock Is the Better Buy?
Turning to Wall Street, out of the stocks mentioned above, analysts think that ASML stock has the least room to fall. In fact, ASML’s average price target of $953.53 per share implies more than 3% downside risk. On the other hand, analysts expect the largest fall from LRCX stock, as its average price target of $120.48 equates to a loss of 14.7%.
