A Shift in the Semiconductor Landscape
The semiconductor industry is experiencing a seismic shift, and investors are taking notice. Shares of Lam Research, a leading semiconductor equipment maker, plummeted 9.7% in a single afternoon session. The catalyst? ASML, the largest supplier of equipment used in making advanced chips, issued a disappointing earnings pre-announcement.
A Weak Outlook for 2025
ASML’s revised sales forecast for fiscal year 2025 fell short of expectations, with projected sales ranging from 30 billion euros to 35 billion euros. Moreover, quarterly bookings were reported to be below par. The company’s management attributed the slowdown to sluggish recovery in certain markets, which is expected to persist into 2025.
China’s Contribution in Question
Adding to the concerns, ASML’s CFO Roger Dassen projected China’s contribution to overall revenue to decline to around 20%, down from the previous estimate of 49%. This raises red flags about the region’s potential weakness.
Ripple Effects in the Industry
ASML’s technology is crucial to chipmakers like Nvidia, AMD, Intel, and Samsung, which produce advanced chips designed for AI workloads. The weak earnings and outlook may signal a softening in the industry, prompting investors to reassess their positions.
Buying Opportunities Amidst Volatility
While the stock market is prone to overreactions, significant price drops can create opportunities to invest in high-quality stocks. Lam Research’s shares have been volatile, with 17 moves greater than 5% over the last year. Today’s move indicates that the market considers this news meaningful but not game-changing.
Micron’s Impressive Earnings
In contrast, Micron’s recent earnings report sent semiconductor stocks soaring, with the company recording a staggering 93% revenue growth. The surge was attributed to growing demand for memory chips powering generative AI applications.
Lam Research’s Potential
Despite the current dip, Lam Research remains an attractive opportunity. The company is up 3.3% since the beginning of the year, but still trades 31.3% below its 52-week high. Long-term investors who bought into the company five years ago have seen their investment more than triple.
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