Chip Equipment Giant ASML Faces Uncertainty
ASML, Europe’s most valuable technology company, has sparked concern among investors and analysts after slashing its 2025 financial guidance. The Dutch computer chip equipment maker cited weaknesses in markets beyond AI and delayed orders as the reason behind the cut.
Market Dominance Under Threat?
While ASML’s position as an essential supplier to chipmakers remains unchallenged, doubts have emerged over its short-term sales prospects and long-term ability to outgrow the overall market. The company’s shares plummeted by 4.9% to 635.60 euros on Wednesday, following a 20-year record selloff on Tuesday.
A Decade of Dominance
ASML’s dominance of the market for lithography tools, crucial for creating circuitry, has driven its decade-long surge. The company’s shares reached an all-time high above 1,000 euros ($1,088) per share in July. However, the pandemic-induced demand surge has slowed, and customers are now delaying new plant constructions and upgrades.
Customers’ Spending Plans in Question
Manufacturers of logic chips, used in smartphones, PCs, and other devices, are planning fewer expansions, relying on existing equipment for longer. Memory chip makers are also scaling back their expansion plans. ASML’s executives will address analysts on a call later on Wednesday to provide more insight into the guidance cut.
Investors Reassess Expectations
Nick Rossolillo of Concinnus Financial, who has owned ASML stock since 2022, believes investors need to temper their expectations. “An upstream equipment supplier like ASML is highly reliant on the spending plans of its manufacturing customers,” he said.
TSMC’s Spending Plans Under Scrutiny
Analysts are looking closely at TSMC, which makes AI chips for Nvidia and smartphone chips for Apple. Michael Roeg of Belgian investment bank Petercam Degroof notes that TSMC’s strong sales trends mask the overall health of the semiconductor industry. “TSMC has been spending relatively low capex numbers this year, and they may do so again next year due to their overall plant utilization not being as good as their sales numbers suggest.”
Challenges Ahead for ASML
Among ASML customers that make logic chips, Intel plans to cut capital spending by $10 billion in 2025, while Samsung faces challenges at its Texas factory. Additionally, changes in chipmaking techniques could lead to lower spending on ASML’s tools. Han Dieperink, chief investment officer at Aureus, believes customer delays may force pricing concessions from ASML, squeezing margins. Declining orders from Chinese chipmakers due to U.S.-led export restrictions are also a concern. Despite these challenges, ASML remains a cornerstone investment for many.
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