Tokyo Electron Lags as AI Frenzy Favors Cutting-Edge Chipmakers

Tokyo Electron's stock is lagging behind its peers due to its exposure to struggling customers Intel and Samsung, as well as uncertainty surrounding its major market in China. The Japanese company's full-year earnings outlook has been revised below estimates, citing slower demand from logic-chip makers. Its shares have fallen 17% this year, making it one of the worst performers in the NYSE FactSet Asia Semiconductor Index.

Tokyo Electron Ltd., a key player in the global chipmaking supply chain, is facing significant challenges that have led to a decline in its stock performance. The company's exposure to struggling customers Intel Corp. and Samsung Electronics Co., coupled with uncertainty surrounding its major market in China, has contributed to a 17% drop in its shares this year, making it one of the worst performers in the NYSE FactSet Asia Semiconductor Index [1].

Tokyo Electron's customers include leading-edge firms but also struggling ones like Intel or Samsung, which have not benefited as much from the post-ChatGPT AI boom. The Japanese company's wide exposure to China, which accounts for an estimated 40% of its overall business, is also a source of uncertainty given US sanctions and a creaky economy [1].

The company's full-year earnings outlook has been revised below estimates, citing slower demand from logic-chip makers. This slowdown is attributed to declining demand from Chinese chipmakers, who had been buying up equipment out of fear of further tech export restrictions by the US and its allies. China accounts for 38.6% of Tokyo Electron's total revenue [1].

The strong business ties to China also make the company vulnerable to geopolitical tensions. The US revocation of the chip gear waiver for Samsung and SK Hynix Inc. for their Chinese plants is one such risk. Additionally, Beijing's efforts to achieve tech self-reliance could lead to a reduction in reliance on foreign suppliers [1, 2].

Investor sentiment has soured further after Taiwanese prosecutors charged three people, including a former Tokyo Electron employee, for allegedly stealing trade secrets from TSMC. Despite these challenges, Tokyo Electron remains a critical supplier to thriving AI-related manufacturers, including TSMC, the main chipmaker to Nvidia Corp. [1].

Some analysts remain optimistic about a potential recovery in China, which is expected to unleash stimulus policies to drive the world’s No. 2 economy. However, for now, investors appear more drawn to companies less affected by geopolitical risks [1].

In conclusion, Tokyo Electron's stock performance has been negatively impacted by its exposure to struggling customers and geopolitical uncertainties. The company's ability to navigate these challenges and adapt to the evolving market dynamics will be crucial for its future growth.

References:
[1] https://www.bloomberg.com/news/articles/2025-09-05/ai-investment-frenzy-leaves-tokyo-electron-a-market-laggard
[2] https://semiwiki.com/forum/threads/us-makes-it-harder-for-sk-hynix-samsung-to-make-chips-in-china.23501/