One of the stories of 2024 has been the enormous share price gains enjoyed by chipmakers like Nvidia and Broadcom, but it’s not all good news in the sector, as evidenced by ASML’s share price shellacking.
The Dutch chipmaker lost its position as Europe’s most valuable technology company to German software giant SAP after shocking investors with a truly ugly earnings quarter.
New orders in the third quarter totalled just €2.6 billion, less than half that expected by analysts. Shares suffered their biggest one-day fall in 26 years, erasing over €60 billion in market capitalisation. In July, ASML shares were up over 50 per cent in 2024. Now, they’re in the red for the year.
It’s some turnaround, one reflecting increased tensions between the US and China – American chip export restrictions mean ASML estimates sales to China will fall to 20 per cent of overall sales in 2025, compared to 47 per cent currently – as well as the increasingly obvious split in chipmakers’ fortunes.
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Enormous demand for AI-related chips (think Nvidia, Broadcom) is overshadowing weaker demand across the rest of the semiconductor industry (think Intel, Samsung). Unfortunately for ASML, UBS estimates that AI-related chips account for only 15 per cent of sales. Being on the wrong side of the chip demand divide has left it struggling to keep pace with the sector’s shifting fortunes.
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