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With U.S.-China trade tensions ratcheted back up, CNBC’s Jim Cramer said investors need to look to Europe to better understand the animosity between the world’s two largest economies. That’s where they will find ASML , the Netherlands-based maker of advanced lithography machines that are essential in producing the cutting-edge semiconductors from the likes of Nvidia that are fueling the artificial intelligence boom. Nvidia is a long-held position in Cramer’s Charitable Trust, the portfolio used by the CNBC Investing Club. On Wednesday, ASML reported what Cramer called a “very good” third quarter, with better-than-expected bookings and margins. However, ASML CEO Christophe Fouquet warned that it expects its sales to Chinese customers to drop “significantly” next year compared with its “very strong business there in 2024 and 2025.” In the U.S. government’s crackdown on the sales of advanced chips to China over national security concerns, it has also placed export restrictions on certain chipmaking tools and equipment in an effort to hobble the manufacturing capabilities of Chinese firms. The Dutch government has followed suit with licensing requirements that impact ASML. In effect, ASML’s most advanced technology — a marvel of engineering known as extreme ultraviolet (EUV) lithography machines — has been cut off from China, but it’s been able to sell less-advanced types of lithography equipment into the country. “That is the crux of what the Chinese are most worried about,” Cramer said Wednesday morning on CNBC. “Without AMSL, they can’t do what Nvidia does. … AMSL is the key. And as long as we continue to put a restriction on ASML, the Chinese have to be going nuts, because they can’t beat” the U.S. on chip technology. ASML is the only company that sells EUV machines, which use short wavelengths of light to print intricate circuit patterns on pieces of silicon. It’s a highly complex process, and the machines took two decades to develop and contain roughly 100,000 parts, according to the company . Buyers of the machines include Taiwan Semiconductor Manufacturing Company , the world’s dominant third-party chip producer. Earlier this year, the Dutch minister of defense said Chinese efforts to spy on the country’s semiconductor industry were “intensifying.” Cramer’s comments Wednesday follow a volatile few days on Wall Street as investors grapple with rekindled trade tensions between the U.S. and China. In particular, stocks sold off aggressively Friday after President Donald Trump threatened to retaliate against Beijing for its latest crackdown on rare earth mineral exports , an industry that China dominates. It called to mind some of the tariff-driven sell-offs experienced this spring, when Trump began implementing his aggressive trade policies upon returning to the White House in January. After an apparent attempt to soothe tensions over the weekend, Trump on Tuesday took aim at China for “purposefully not buying” American soybeans. For investors, Cramer suggested worrying about soybeans and not semiconductors is missing the forest for the trees. The importance of semiconductors in the U.S.-China rivalry grew during Trump’s first term and was solidified under former President Joe Biden, who expanded the use of export controls Bolstering the competitiveness of China’s domestic semiconductor industry has been a major focus of Chinese President Xi Jinping going back a decade . Researchers in China recently claimed a breakthrough in lithography technology, according to the Center for Strategic and International Studies , a Washington-based think tank. On the other hand, Cramer said China’s upper hand on the U.S. on rare earth minerals, which are important components in fighter jets, electric vehicle motors, and more, is another important layer to the trade tensions. “Rare earths is an issue,” Cramer said. “The fact is that rare earth is used in fighter jets. That’s a part of the economy we can’t skimp on.”
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