Shares of Dutch chip equipment manufacturer, ASML ( ASML ) , soared in pre-market trading following the Biden administration’s announcement of a new rule on foreign chip equipment exports to China.

What Happened: ASML ( ASML ) was trading 7.63% higher at $925.84 on higher during Wednesday’s pre-market at $926.49 after closing at $860.24 on Wednesday, according to Benzinga Pro.

The new rule, set to be unveiled next month, will increase U.S. authority to halt exports of semiconductor manufacturing equipment from certain foreign countries to Chinese chipmakers, Reuters reported on Wednesday. However, shipments from key allies such as Japan, the Netherlands, and South Korea, will reportedly be exempted, thereby limiting the rule’s impact.

Major chip equipment manufacturers like ASML ( ASML ) will not be affected by this rule. The announcement led to a significant rise in the shares of both companies.

The announcement had a positive impact on other major chip makers like NVIDIA Corp ( NVDA ). and Advanced Micro Devices, Inc. ( AMD ) which were trading 5.20% and 9.43% higher during Wednesday’s pre-market.

The rule is an extension of the Foreign Direct Product rule, which gives the U.S. government the power to stop the sale of products made using American technology, including those manufactured in a foreign country. This rule has been used for years to keep chips made abroad from Chinese tech giant Huawei.

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The U.S. plans to add about 120 Chinese entities to its restricted trade list, which will include several chipmaking factories, toolmakers, and related companies. However, the rule is still in draft form and may undergo changes before publication next month.

Why It Matters: This development comes amid an escalating U.S.-China chip war, with the Netherlands, a primary source of machinery and expertise for advanced semiconductors, under pressure from Washington to curb Beijing's semiconductor production capabilities. The Eindhoven University of Technology, a significant talent source for ASML ( ASML ), has been under increasing scrutiny from the U.S. due to its large number of Chinese students.

The U.S. earlier urged Japan and the Netherlands to tighten their export policies in a bid to further restrict China's access to advanced semiconductor technology. This move is a continuation of the 2023 agreement between the U.S., Japan, and the Netherlands to prevent China from acquiring advanced chipmaking equipment that could potentially enhance its military capabilities.

Earlier this year, under U.S. pressure, The Hague imposed restrictions on exports of ASML's ( ASML ) immersion DUV lithography machines, a key machinery category. Before the ban, U.S. officials requested ASML ( ASML ) to cancel some scheduled shipments to Chinese customers.

China has previously criticized the U.S.'s tightening of semiconductor export regulations, which have impacted exports and affected companies like Nvidia ( NVDA ) and AMD. However, U.S. Secretary of State Antony Blinken has clarified that the U.S. export controls are not designed to hinder China's economic or technological advancement.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari