ASML cuts annual sales forecast, sends tech stocks tumbling world over

Semiconductor stocks in the US and Asia took a hit after ASML, a major supplier of chip-making equipment, slashed its annual sales forecast, citing weak demand for non-AI chips.

The unexpected announcement sent ripples across global markets, raising concerns about the broader health of the semiconductor industry.

NVIDIA and chip giants slip

NVIDIA, a leading player in AI chips, saw its shares drop by 4.5 per cent, wiping out around $158 billion from its market capitalisation. The decline came just a day after NVIDIA briefly surpassed Apple as the world’s most valuable company. With this latest slump, the gap between NVIDIA and Apple’s $3.56 trillion valuation has widened once again.

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Other major chipmakers also suffered losses, with shares of AMD, Intel, Arm, Broadcom, and Micron falling between 3.2 per cent and 5 per cent. The semiconductor sell-off dragged the Philadelphia Semiconductor Index down by nearly 5 per cent, putting additional pressure on the Nasdaq index.

ASML’s forecast sparks industry concerns

ASML’s stock plummeted by 16 per cent after the Dutch firm inadvertently published its results ahead of schedule. The early release revealed weaker-than-expected bookings, a lowered sales forecast, and hints that the demand recovery for non-AI chips is slower than anticipated.

The company noted that while AI-related chip demand remains strong, logic chipmakers are postponing orders, and memory chip manufacturers are planning only modest capacity expansions. Analysts see ASML’s forecast as a lagging indicator, reflecting challenges that have been building for months across semiconductor factories.

Asian chipmakers, many of whom rely on ASML’s tools, also felt the impact. Taiwan Semiconductor Manufacturing Co. (TSMC) saw its shares dip by 2.3 per cent, while Samsung Electronics and SK Hynix both experienced declines of about 2.5 per cent and 2.2 per cent, respectively.

Pandemic boom fades

The semiconductor industry’s pandemic-fuelled boom has started to stabilise as supply chain disruptions ease, leaving chipmakers cautious about expanding capacity.

Earlier this month, Samsung warned that its third-quarter profits would miss expectations, largely due to difficulties capitalising on the surge in AI chip demand.

Meanwhile, TSMC, a key NVIDIA partner, is forecast to report a 40 per cent jump in third-quarter profits this week, underscoring the divergence within the sector.

Export restrictions loom

Adding to the industry’s challenges, Bloomberg reported that US officials are considering capping export licenses for AI chips to countries in the Persian Gulf. Washington is reportedly concerned that advanced American chips could be diverted through the region to China, circumventing direct export restrictions.

As the AI revolution promises to drive future productivity and technological innovation, the US is eager to maintain its edge in the sector. Analysts say this latest push to limit AI chip exports reflects America’s efforts to safeguard its dominance in a rapidly evolving landscape.

With non-AI chip demand lagging and geopolitical tensions affecting supply chains, the road ahead looks bumpy for semiconductor firms. The industry’s ability to balance AI growth with broader market challenges will be key in navigating these turbulent times.