ASML shares plunge amid regulatory headwinds and valuation concerns

ASML, Europe's largest tech firm, has been one of the worst performers in the Pan-Euro Stoxx 600, with its shares plunging 24% in the third quarter.

The decline was primarily driven by regulatory restrictions, particularly export curbs to China.

Furthermore, global trends have seen funds shift away from AI stocks into sectors more likely to benefit from a lower interest rate environment, intensifying valuation concerns and putting additional downward pressure on ASML's shares.

Despite this, ASML shares are still up 8.6% year-to-date and have risen 32% over the past year.

ASML is heavily reliant on the Chinese market, and like many semiconductor stocks, it has suffered from the Biden administration's restrictions on chip exports to China.

In the second quarter, the Dutch chip equipment maker reported strong earnings, with sales in China contributing 49% of its overall revenue for the first half of the year, up from a 39% market share in the final quarter of 2023.

However, on the same day, the US announced stricter export curbs on China, leading to a sharp decline in semiconductor stocks. This news caused ASML shares to tumble by 11%.

Sales in China could be impacted by US export restrictions aimed at limiting China's ability to advance its technology for military purposes, a move framed as addressing "national security" concerns.

The Biden administration has imposed more restrictive trade policies on companies like ASML, which have continued to supply China with older generations of computer chips used in cars and appliances.

The US may impose direct controls on foreign-made products using even minimal amounts of American technology.

Last month, the Dutch government imposed further restrictions on ASML's chip exports to