Investors in chip stocks are facing a fresh gut check after a tepid outlook from key equipment supplier ASML Holding NV sparked a global rout in the sector.
Combined market value losses for an index of US-traded chipmakers plus the largest Asian stocks reached more than US$420 billion. Shares in ASML yesterday extended losses, falling 5 percent in Amsterdam, after plunging 16 percent the previous day.
The warning from Netherlands-based ASML halted a rally that had pushed a gauge of US-traded shares to a three-month high. Nvidia Corp sank nearly 5 percent on Tuesday in New York, after reaching a record close earlier this week on reduced concern over production issues with its newest artificial intelligence (AI) product.
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ASML’s shares on Tuesday tumbled by the most since 1998 after the manufacturer of the world’s most advanced chipmaking machines cut its outlook on sluggishness in areas beyond AI. It lowered the top end of its guidance range for next year’s total net sales to 35 billion euros (US$38.14 billion) from 40 billion euros.
While a weak forecast for next year was expected from ASML given slowness in non-AI applications as well as reduced spending by Intel Corp and other factors, “the magnitude of the correction is a negative surprise,” Citigroup Inc analyst Atif Malik wrote in a note.
Exacerbating the situation was the lack of accompanying color as the results were released mistakenly a day earlier than scheduled.
ASML published the release prematurely “due to a technical error,” it said in a statement.
The company was yesterday to hold a call with investors at 3pm in Amsterdam.
Tuesday’s collapse in the share price of ASML erased about 50 billion euros from the company’s market value. That places it among Europe’s five biggest single-day market capitalization wipeouts ever. It ranks alongside the plunges recorded by Nokia Oyj and Vodafone Group PLC when the Internet bubble burst some 25 years ago.
Losses in Asian trading yesterday were led by ASML peers including Tokyo Electron Ltd, which fell 9.2 percent, while Lasertec Corp, which makes equipment to inspect chips, lost 13.4 percent in Tokyo.
Shares of top foundry Taiwan Semiconductor Manufacturing Co (台積電), which is today to report third-quarter results, ended 2.34 percent lower in Taipei, while shares in Samsung Electronics Co and SK Hynix Inc closed down 2.46 percent and 2.18 percent respectively in Seoul.
Despite the market reaction, some investors see ASML’s woes as possibly specific to the Dutch company. AI demand remains brisk and Beijing’s efforts to revive its economy are seen helping a broader recovery.
“We believe chipmakers are strategically reducing orders for ASML, and this is negatively affecting ASML’s earnings,” Fibonacci Asset Management Global Pte chief executive officer Jung In-yun said.
Whether the driver is cost-cutting or other strategic reasons is unclear, he said, adding that stimulus from China might spur a rebound in chip demand.
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