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Chip stocks crashed! ASML (ASML.US) plunged more than 16% as its third-quarter order volume fell short of market expectations by half.

AInvestTuesday, Oct 15, 2024 11:50 am ET
1min read

ASML (ASML.US) shares plunged in the US market and were briefly halted in Amsterdam trading. As of writing, the stock was down over 16% to $727. The company's Q3 earnings were disappointing, with sales and gross margin in line with expectations, but orders were half of market expectations, and the company cut its sales target for next year. The company reported total net sales of approximately 7.5 billion euros in the quarter, up 20% sequentially, and in line with analyst expectations of 7.17 billion euros; net profit of approximately 2.1 billion euros, up 32% sequentially, and in line with expectations of 1.91 billion euros; gross margin of 50.8%. ASML's third-quarter orders were 2.63 billion euros, down 53% sequentially, far below market expectations of 5.39 billion euros.

ASML expects its total net sales in Q4 2024 to be between 8.8 billion and 9.2 billion euros, with a gross margin of 49% to 50%, in line with expectations. The company expects its total net sales for the full year of 2024 to be approximately 28 billion euros.

However, the company lowered its growth expectations for 2025, particularly for EUV equipment demand, due to customers' cautious approach to new technology nodes and the slow recovery of the logic chip market, which delayed the timing of EUV demand, leading to the company's expectations below the previously given range. ASML expects its total net sales in 2025 to be between 30 billion and 35 billion euros, at the lower end of analyst estimates of 35.94 billion euros; gross margin will be maintained at 51% to 53%, compared to the company's original expectation of approximately 54%-56%.

Christophe Fouquet, president and CEO of ASML, said in a statement: "While the strong development in the AI field brings some upside potential, the slower-than-expected recovery in other markets has led to more cautiousness from customers. In particular, in the logic chip field, the slowdown in the promotion of new nodes due to intense competition among foundries has changed the timetable for lithography equipment demand."

The company also announced that it will pay a dividend of 1.52 euros per share on November 7, 2024. In addition, the company did not repurchase any shares in the third quarter. Since hitting a record high in July, the European technology company's shares have fallen 30%, due to the possibility of more restrictions on its operations in other countries and the overall weakness of the industry.

Chip stocks followed ASML lower on Tuesday, with Nvidia (NVDA.US) down over 4%, having once fallen nearly 7%, its biggest intraday drop since September 6; AMD (AMD.US) down over 4%; Micron Technology (MU.US) down over 2.5%; and TSMC (TSM.US) down over 2%.

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