Share prices of top industrial gas, natural gas, and hydrogen company Air Products and Chemicals (APD 0.43%) just sank. Investors may have been spooked by some commentary from CEO Seifi Ghasemi, who had this dire warning on the last earnings call:

I'd just like to caution everybody on the call that the economic situation in China is not as robust as people might think. As you know, we make products that are used instantaneously. We are a great leading indicator. And things are not really that exciting in that part of the world.

China is the world's second-largest economy, accounting for nearly 20% of global GDP. If economic conditions get tough in China, it can spell disaster for many company stocks that do business there. Is Air Products sounding the alarm for investors?

Important context on a unique industrial process

From a high-level view, Air Products' stock plunge was due to the company lowering its outlook for fiscal 2024 adjusted earnings per share. Previously, it was expecting about 13% growth this year. After its first-quarter update (for the period ended in December 2023, as Air Products' fiscal year ends in October), management downgraded adjusted earnings growth expectations to 6% to 9% over 2023.

The reason for the downgrade? Ghasemi noted the lackluster outlook for China's economy, and Air Products is specifically feeling the pinch in its helium business. What's the deal with helium?

Helium is obtained during oil and natural gas extraction. As Air Products is a leader in natural gas equipment technology, it's naturally also a top supplier of helium. And helium has become a critical ingredient in all sorts of technology and manufacturing processes.

One of the manufacturing processes that uses ample amounts of helium is the production of semiconductor devices. China has been buying lots of semiconductor manufacturing equipment to bolster its domestic chipmaking capabilities. Record shipments of chipmaking machinery were sold to China in 2023 from top suppliers like ASML, Applied Materials, and others. As semiconductors have proliferated around the world, helium prices have increased.

But now it seems that chip manufacturing activity is tapering off in China. Air Products' largest volume of helium sales goes to China, so the declining helium demand off peak levels (and thus ultimate pricing) is starting to falter too.

The short story is this: Air Products' business in China may be indicating what's going on in semiconductor manufacturing, instead of indicating a widespread downturn for the economy overall and impending doom for investors.

Air Products stock is still top-notch

Of course, the making and sale of electronics has become critical to global economic health, so Air Products' warning on China is worth monitoring. But at this point, this appears to be normal business cyclicality from an industrial giant.

Besides, while helium sales in the East are having an effect on Air Products' profitability right now, the bulk of this business is still tied to the "energy transition" economy. That means higher energy consumption derived from sources like liquid natural gas (or LNG, in which Air Products is the top supplier of LNG liquefaction equipment) and the emerging hydrogen energy industry. This core energy operation is still growing, and Air Products is investing heavily ($5 billion to $5.5 billion in capital expenditures this year alone) in support of it.

After the latest update, Air Products stock trades for cheaper than it has in years at 21 times trailing 12-month earnings per share, and 15 times on a one-year-forward expected earnings basis. Earnings growth may be slowing, but 2022 and 2023 were an especially strong couple of years. The company has a long track record of steady growth, and now yields a 3.3% annual dividend. I was slowly adding to my position last year, and see no reason to stop now -- even if China's economy is temporarily throttling growth.