Chip Equipment Giant ASML Takes a Hit: What’s Behind the Slump?
The chip equipment maker ASML (NASDAQ: ASML) is feeling the heat, with its stock plummeting for the second day in a row. The culprit? A lackluster earnings call that shed light on its dismal guidance for 2025. As of 12:23 p.m. ET on Wednesday, the chip stock had nosedived 5.6%.
A Slowdown in Demand Recovery
While there were no earth-shattering revelations in today’s earnings report, it did highlight the significant challenges ASML is facing. The company’s management revealed that sales from China, which accounted for a whopping 47% of its revenue in the quarter, would return to historical levels of around 20% in 2025. This slowdown in demand from China is a major concern.
U.S. Pressure and Export Ban Take Their Toll
Adding to ASML’s woes is the U.S. ban on exporting its most advanced equipment to China. This pressure has already started to take its toll on the company’s bottom line. Yesterday, ASML announced that it expects 2025 revenue to range from 30 billion to 35 billion euros ($32.7 billion to $38.1 billion), a significant drop from its 2022 forecast of 30 billion to 40 billion euros.
Weakness at Key Customers
Wall Street is also focused on the weakness at ASML’s key customers, including Intel and Samsung. Although the company didn’t provide specifics on which companies are scaling back orders, it expects some of that demand to be pushed out into 2026.
A Delay, Not a Structural Flaw
Despite this setback, ASML remains optimistic about its potential in the AI space. This slowdown seems to be more of a delay rather than a fundamental flaw in the business or industry.
A Smart Long-Term Buy?
While analysts are likely to slash their estimates on the news, ASML’s stock looks reasonably priced after the two-day sell-off. Considering its significant economic moat in lithography equipment and the temporary nature of the slowdown, ASML still appears to be a smart long-term buy.
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