By Eric J. Savitz and Adam Clark
ASML Holding stock dropped Wednesday after orders missed expectations. It's a sign of caution in the chip industry despite a race to build up national semiconductor sectors.
The Dutch company's net bookings in the first quarter of the year came to EUR3.61 billion, or $3.84 billion. Analysts had forecast orders of nearly EUR5.10 billion, according to consensus estimates by Visible Alpha, an investment research platform.
American depositary receipts of ASML were down 7.2% Wednesday afternoon, with the Nasdaq Composite off 0.9%. ASML's ADRs have risen 29% this year through Tuesday's close.
ASML supplies the lithography machines that are essential for manufacturing semiconductors. Customers include Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel.
The ASML news was also weighing on shares of those companies and others, with Micron Technology off 3.5%, Broadcom down 2.6%, Qualcomm 2% lower, and Intel 1.4% in the red. Arm shares are taking the biggest hit, down 9.4%, reducing the chip design firm's year-to-date gain to 47%. SoftBank, which holds a majority stake in Arm following a partial spinout in an IPO last fall, is down 4.1%. Arm cis one of the stock market's most aggressively valued stocks, at about 28 times expected 2025 revenues.
Other chip-manufacturing equipment suppliers were also losing ground Wednesday, with Applied Materials, KLA, and Lam Research all down more than 4%.
The fall in orders is a reminder that despite the boom in chips used for powering artificial-intelligence technology, many other sectors are still facing a slowdown in demand following the surge in purchases during the Covid-19 pandemic.
The market will get some fresh data on the state of the semiconductor market when Taiwan Semiconductor reports earnings in a few hours.
"TSMC and Samsung are holding off new orders as they work through stockpiles of hardware used in smartphones, computers and cars," wrote Mizuho Securities' Daniel O'Regan.
Bookings for extreme ultraviolet lithography machines, ASML's most advanced systems, came to EUR656 million. ASML's EUV systems take 18 months to build, and it is barred from selling them to China, alongside other lithography technology.
Despite those restrictions, a record 49% of ASML's machine sales in the first quarter came from China, with Chinese chip makers buying up older equipment in the face of further potential U.S. and Dutch sanctions.
"Our outlook for the full year 2024 is unchanged, with the second half of the year expected to be stronger than the first half, in line with the industry's continued recovery from the downturn," said ASML Chief Executive Officer Peter Wennink, in a statement. "We see 2024 as a transition year."
ASML reported a first-quarter net profit of EUR1.22 billion, compared with EUR2.05 billion in the fourth quarter. Sales came to EUR5.29 billion, down from EUR7.24 billion.
ASML expects second-quarter net sales of EUR5.7 billion to EUR6.2 billion, and a gross margin of 50% to 51%.
Write to Adam Clark at adam.clark@barrons.com and Eric J. Savitz at eric.savitz@barrons.com
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April 17, 2024 15:24 ET (19:24 GMT)
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