The semiconductor sector experienced a turbulent week, with ASML Holding N.V. (ASML) taking the brunt of the turmoil. ASML’s stock plunged 3.9% in pre-market trading on Wednesday, following a massive 16.26% drop on Tuesday’s close. The trigger? An accidental early release of their third-quarter earnings report, which revealed a lowered sales forecast for 2025.
This gloomy outlook reverberated across the industry, pulling down other semiconductor giants. While ASML struggled, Nvidia Corp. (NVDA) saw a 0.70% increase in pre-market trading after a 4.69% decline on Tuesday. Similarly, Advanced Micro Devices, Inc. (AMD) rose by 0.39% following a 5.22% drop. Broadcom Inc. (AVGO) and Taiwan Semiconductor Mfg. Co. Ltd. (TSM) also displayed positive movements. Broadcom increased by 0.40% after a 3.47% fall, and Taiwan Semiconductor rose 0.89% after a 2.63% decline.
ASML’s CEO acknowledged a gradual recovery and cautious customer sentiment, while CFO Roger Dassen projected China’s contribution to ASML’s revenue to normalize at 20% next year, down from 49% in the June quarter. The semiconductor sector also grappled with potential U.S. restrictions on AI chip sales, as reported by Bloomberg.
The market’s sharp reaction to ASML’s guidance cut for 2025, leading to a broader sell-off in AI hardware stocks, has sparked debate. Gene Munster from Deepwater Asset Management argues that the market’s response is an overreaction. He points out that only about 10% of ASML’s revenue is tied to AI demand, with a significant portion stemming from its extreme ultraviolet lithography machines, crucial for AI chip production.
The volatility in the semiconductor sector reflects the delicate balance between growth and uncertainty. While the industry faces challenges like geopolitical tensions and evolving AI chip regulations, the long-term growth potential remains substantial. Investors are left navigating this complex landscape, trying to decipher the true impact of ASML’s revised forecast on the broader semiconductor market.