Following the disappointing earnings outlook from lithography machine leader ASML, global chip stocks have experienced a significant decline. The Philadelphia Semiconductor Index, along with major Asian semiconductor companies, has seen a combined market value loss exceeding $420 billion.
ASML, headquartered in the Netherlands, issued a warning which tempered the strong rebound momentum of chip stocks following a summer sell-off. The company, a leading supplier of advanced chip manufacturing equipment, downgraded its earnings outlook due to weakness outside the AI sector. On October 15, its stock recorded the largest drop in the European market since 1998 after it announced third-quarter orders that were only about half of analysts' expectations. ASML also lowered the upper range of its 2025 net sales forecast from 40 billion euros to 35 billion euros.
Citi analyst Atif Malik commented in a report that the weaker 2025 performance outlook for ASML was anticipated, given slower growth in non-AI applications and spending cuts by Intel. However, the extent of the downgrade was unexpected.
On October 16, ASML's Asian market peers saw significant declines, with Tokyo Electron dropping as much as 10%, and leading wafer foundry TSMC falling by 3.3%.
Despite the strong market reaction, some investors believe that ASML's challenges might be unique to the company. AI demand remains robust, and economic stimulus measures are seen as beneficial for a broader recovery.
Jung In Yun, CEO of Fibonacci Asset Management Global Pte., stated that chip manufacturers might be strategically reducing orders from ASML, negatively impacting its profitability. The motivations behind these strategic decisions, whether cost-cutting or other reasons, remain unclear. He also noted that stimulus measures could boost a recovery in chip demand.
