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ASML’s earnings weigh on semiconductor stocks and bring them down.

Chip stocks fell on Wednesday after ASML, a key developer of semiconductor manufacturing equipment, said that bookings fell by 61% sequentially during the first quarter, a steeper drop than investors had expected. The Dutch company is essentially the only supplier of machines needed to build the most advanced chips, which often cost hundreds of millions of dollars each. Its main customers include TSMC, Samsung, and Intel, with its top two customers accounting for over half of its sales in 2023.

ASML’s stock fell over 8% on a day when the entire S&P 500 index was only down less than 1%. This decline had a ripple effect on other semiconductor stocks as well. During trading on Wednesday, AMD’s stock fell over 4%, Nvidia shares fell about 3%, Intel shares fell nearly 2%, Qualcomm was off 2%, and Arm was trading nearly 10% lower on Wednesday. The drop in bookings for ASML’s machines could signal a downturn in the semiconductor industry, impacting chip companies and even licensing firms like Arm.

Foundries, which physically manufacture chips, are crucial in the semiconductor supply chain. ASML’s total bookings fell 4% year-over-year, with CEO Peter Wennink mentioning a stronger second half of 2024 as the industry recovers from a downturn. Wennink, who will retire at the end of the month, expressed optimism about future orders from companies like Intel and TSMC, especially with the expected boost from government subsidies like the CHIPS Act in the U.S.

Wennink highlighted the significance of forthcoming orders from larger customers and the impact of government incentives on ASML’s sales. He noted the potential for increased orders later in the year from companies building foundries in the U.S. while not specifying the effects of export controls on China. With key leadership changes and strategic outlooks ahead, ASML is navigating a pivotal phase in the semiconductor industry.

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