The decline in semiconductor stocks caused significant indexes to retreat from their peak levels. ASML Holding NV, a Dutch manufacturer of chip equipment, was at the forefront of this downturn, with its stock dropping 17% after revealing a considerable decrease in sales and an outlook that fell short of expectations. The company’s prudent projections have sparked worries regarding the demand for non-AI chips, implying that the semiconductor sector may experience a slowdown outside the rapidly growing artificial intelligence market.
This news sent waves through the market, adversely affecting the shares of other prominent semiconductor firms, such as Advanced Micro Devices Inc (AMD) and Nvidia. Additionally, a report indicating that the US is contemplating export restrictions on certain chip sales intensified investor anxieties, thereby pulling the entire chip sector down. Nvidia dipped by over 5%, Broadcom fell by more than 3%, and Taiwan Semiconductor Manufacturing Company experienced a decline of over 2% in its stock price.
The Nasdaq Composite, heavily weighted towards technology, decreased by 1%, while the S&P 500 and Dow Jones Industrial Average both saw a drop of 0.76%.
New hurdles for the semiconductor sector
The downturn in the semiconductor market overshadowed the stronger-than-expected earnings from major banks, including Goldman Sachs, Bank of America, and Citigroup.
Meanwhile, oil prices created fluctuations in the commodities market, with Brent crude experiencing a decline of up to 5% during intraday trading as geopolitical tensions between Israel and Iran started to ease somewhat. Although Israel is poised to respond to a prior Iranian missile strike, it has informed the US that its focus will be solely on military targets. The drop in chip stocks along with oil prices happens against a backdrop of a more general market rally, buoyed by solid bank earnings and positive economic indicators.
However, ASML’s cautious viewpoint has raised alarms about whether growth in the semiconductor industry can be sustained outside the realm of AI. As investors keep a close watch on happenings in the chip industry and geopolitical issues, the market remains highly responsive to any indications of reduced demand or potential disruptions in the supply chain. The ensuing weeks and months will be pivotal in shaping the future of the semiconductor sector and its influence on the broader market.
