Chip Stocks Drop Following Noteworthy Earnings Report

Chip stocks dropped on Wednesday on the announcement by ASML, a significant manufacturer of machinery used in semiconductor manufacturing, of a 61% sequential decline in bookings for the first quarter. The equipment required to produce the world’s most sophisticated semiconductors, which may cost hundreds of millions of dollars apiece, are exclusively available from ASML. The largest CPU foundries in the world, including TSMC, Samsung, and Intel, are among the primary clients of the Dutch company, which shipped 449 “lithography” machines in 2023.

Almost half of ASML’s sales in 2023 came from its top two clients. In Taiwan and South Korea, the home countries of Samsung and TSMC, respectively, sales were down. The biggest equipment provider to computer chip manufacturers, ASML, revealed on Wednesday lower-than-expected first-quarter new bookings, despite continued sales to China in defiance of restrictions spearheaded by the United States.

At 1240 GMT, shares of the largest tech company in Europe, which had gained 34% so far this year, had dropped 4.5% to 872.50 euros. The Dutch company is anticipating a robust 2025 because to demand for AI and memory chips, particularly from key client TSMC of Taiwan, which produces chips for Apple and Nvidia, despite a dip in demand for its most sophisticated machinery.

The industry leader in lithography equipment, which can run into the hundreds of millions of euros each and use laser beams to assist in the creation of tiny circuits, is ASML. It is expected to gain from new chip facilities that the governments of South Korea, Japan, Taiwan, and the US have supported.

3.6 billion euros ($3.8 billion) in new bookings were made in the first quarter, significantly less than the 5.4 billion euros predicted by Reuters’s panel of analysts. Investors and analysts accepted this, pointing out that numerous factories under construction throughout the world will require ASML equipment, but they also pointed out that it would be problematic if no new orders were placed by the end of the year. Currently, ASML receives approximately 25% of its revenue from upgrades, maintenance, and maintaining its expanding installed base of machinery.