STORY: Shares in chip-gear giant ASML tumbled on Wednesday despite a strong second quarter performance.

Europe's largest technology company beat forecasts and showed a rise in AI-linked bookings.

But investors were alarmed by the possibility of tighter restrictions on the Dutch firm's exports to China.

Bloomberg reported Tuesday that the U.S. has told allies, including the Netherlands, it may take action to restrict exports of chip equipment to China if they fail to do so themselves.

ASML is already restricted from selling most of its advanced product lines in China.

The company declined comment on the report.

The Dutch foreign ministry could not immediately be reached for comment.

New CEO Christophe Fouquet said ASML viewed 2024 as a "transition year", with broadly flat performance as it prepares for a strong 2025.

He said the firm sees strong developments in AI driving most of the industry's recovery and growth.

Net income of $1.74 billion for the second quarter was down close to a fifth from a year earlier - but beat analyst forecasts.

Revenue fell nearly a tenth to about $6.8 billion, but again beat projections.

The stock was down over 7% in early trading.