The chip industry faced a major setback this week after a disappointing forecast from key equipment supplier ASML Holding NV triggered a sharp global selloff. The grim outlook has raised fresh concerns among investors, leading to a dramatic slide in the market value of chipmakers worldwide.
Chipmakers Shed $420 Billion in Market Value
The warning from ASML, a Netherlands-based company specializing in advanced chipmaking equipment, resulted in a combined market value loss of more than $420 billion for an index tracking U.S.-listed chipmakers and the largest Asian semiconductor firms. This downturn interrupted a rally that had propelled U.S.-traded chip stocks to their highest levels in three months.
Nvidia and ASML Lead Declines
On Tuesday, Nvidia Corp. saw its shares plummet nearly 5%, erasing gains made earlier in the week after alleviated concerns over production issues with its latest AI products. ASML’s shares, meanwhile, suffered their steepest decline in Europe since 1998, extending losses into Wednesday with a further drop of 4.2%. The company’s downward revision of its 2025 sales outlook—cutting the upper range from €40 billion to €35 billion ($38 billion)—was a key catalyst for the market turmoil.
Analyst Reactions to ASML’s Revised Outlook
The weak forecast had been anticipated due to softness in non-AI applications and decreased spending by major customers like Intel Corp. However, Citigroup analyst Atif Malik noted that “the magnitude of the correction is a negative surprise.” The market’s reaction was exacerbated by the lack of detailed explanation, as ASML’s results were accidentally released a day ahead of schedule, leaving investors without the usual clarity on the company’s financial metrics.
Asian Semiconductor Stocks Hit Hard
The selloff extended into Asian markets on Wednesday, where ASML peers faced significant declines. Tokyo Electron Ltd. dropped by as much as 10%, while Taiwan Semiconductor Manufacturing Co., a major foundry expected to report its earnings on Thursday, fell up to 3.3%. The widespread losses underscored the sector’s vulnerability to fluctuations in demand for chipmaking equipment.
Mixed Outlook Amid ASML’s Troubles
Despite the negative market reaction, some analysts believe ASML’s struggles may be company-specific rather than indicative of broader industry weakness. While non-AI demand has faltered, the appetite for AI chips remains robust, and recent economic stimulus efforts in China could help support a sector-wide recovery.
Strategic Order Reductions Cited as a Factor
Jung In Yun, CEO of Fibonacci Asset Management Global Pte., suggested that chipmakers might be strategically cutting orders to ASML, impacting the company’s earnings. Whether these moves are driven by cost-cutting measures or other strategic factors remains unclear. Nonetheless, some experts remain hopeful that China’s economic stimulus could spur a resurgence in global chip demand.
Conclusion
The selloff in chip stocks following ASML’s forecast has exposed lingering concerns about the industry’s outlook, particularly beyond AI-driven growth. While strong AI demand and potential economic recovery in China offer some optimism, the abrupt correction in ASML’s guidance serves as a reminder of the sector’s fragility. Investors will closely watch upcoming earnings reports and industry developments to gauge the path forward for chipmakers.
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