The sell-off in semiconductor stocks pulled major indexes away from their record highs. Dutch chip equipment maker ASML Holding NV led the decline, with its shares plunging 17% after reporting a significant sales drop and a weaker-than-expected outlook. ASML’s cautious forecast has raised concerns about the demand for non-AI chips, suggesting that the semiconductor industry could face slower growth outside the booming artificial intelligence sector.
The news sent ripples through the market, negatively impacting shares of other major semiconductor companies, including Advanced Micro Devices Inc (AMD) and Nvidia. A report that the US is considering export caps on specific chip sales added to investor concerns, further pulling the broader chip sector lower. Nvidia shed over 5%, Broadcom dropped more than 3%, and Taiwan Semiconductor Manufacturing Company stock dipped over 2%.
The tech-heavy Nasdaq Composite fell 1%, while the S&P 500 and Dow Jones Industrial Average both dropped 0.76%.
Chip sector faces new challenges
The semiconductor rout overshadowed better-than-expected bank earnings results from Goldman Sachs, Bank of America, and Citigroup.
Oil prices also made waves in the commodities market, with Brent crude falling as much as 5% in intraday trading as geopolitical tensions between Israel and Iran eased slightly. Though Israel plans to retaliate for a previous Iranian missile strike, it informed the US that it will only focus on military targets. The decline in chip stocks and oil prices comes amid a broader market rally driven by strong bank earnings and upbeat economic data.
However, ASML’s cautious outlook has raised concerns about the sustainability of growth in the semiconductor industry outside of the AI sector. As investors continue to monitor developments in the chip industry and geopolitical tensions, the market remains sensitive to any signs of slowing demand or potential supply chain disruptions. The coming weeks and months will be crucial in determining the trajectory of the semiconductor sector and its impact on the broader market.
