(Bloomberg) — Investors in semiconductor stocks are facing a new test of courage after a lackluster outlook for major equipment supplier ASML Holding NV triggered a global sell-off in the sector.
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The combined market capitalization loss of an index of U.S.-traded semiconductor manufacturers and Asia’s largest stocks amounted to more than $420 billion. ASML stock extended its losses on Wednesday, falling 5.0%.
The warning from Netherlands-based ASML halted a rally in stocks that had pushed a benchmark of U.S.-traded stocks to a three-month high. Nvidia fell nearly 5% on Tuesday after hitting a record close earlier this week as concerns over production problems with its latest artificial intelligence products receded.
ASML shares suffered their steepest decline in Europe since 1998 after the maker of the world’s most advanced chip-making machinery lowered its outlook for weakness in areas other than AI. It lowered the upper end of its guidance range for total net sales in 2025 from 40 billion euros to 35 billion euros ($38 billion).
ASML had expected a weaker forecast for 2025 given factors such as a slowdown in non-AI applications and Intel’s spending cuts, but “the magnitude of the revision is a negative surprise,” Citigroup analysts said. , said Atif Malik. I wrote it in my memo.
What made the situation worse was that the results were mistakenly announced a day earlier than planned, and thus lacked the color that accompanied them. Shareholders are accustomed to well-oiled investor relations to explain how the business works and the timing of orders, reservations, revenue, and shipments. Investors will tune into the post-earnings conference call scheduled for 15:00 CET.
ASML’s share price crash on Tuesday wiped out around 50 billion euros from the company’s market value. This puts it in the top five in terms of daily market capitalization in Europe. This is in line with the steep declines recorded by Nokia Oyj and Vodafone Group Plc when the internet bubble burst about 25 years ago.
Losses in Asian trading on Wednesday were led by ASML’s peers, including Tokyo Electron, which fell as much as 10%. Shares of top foundry company Taiwan Semiconductor Manufacturing Co., Ltd., which will report earnings on Thursday, fell as much as 3.3%.
Despite the market reaction, some investors believe ASML’s woes may be unique to the Dutch company. Demand for AI remains strong, and China’s economic recovery efforts are expected to contribute to a broader recovery.
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“We believe semiconductor manufacturers are strategically reducing orders to ASML, which is having a negative impact on ASML’s revenue,” said Jeong In Yoon, chief executive officer of Fibonacci Asset Management Global. ” he said. He said it’s unclear whether the driver is cost-cutting or other strategic reasons, but added that stimulus from China could spur a recovery in semiconductor demand.
–With assistance from Subrat Patnaik, Neil Campling, and Jan-Patrick Barnert.
(Adds ASML market cap context in paragraph 7.)
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