ASML Earnings Shock is Temporary... Semiconductor Rebound Led by Nvidia and Others

As of the morning of the 17th, the semiconductor market, which was expected to be chaotic due to the shockwave from the poor earnings announcement of Dutch semiconductor equipment company ASML on the 16th, is showing signs of stabilization. Semiconductor stocks, which had plummeted as ASML's sales forecast for next year fell short of expectations, rebounded within a day. The 'ASML shock' feared by the industry appears likely to be a temporary phenomenon.

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According to securities firms and the industry on that day, the Philadelphia Semiconductor Index, composed of semiconductor-related stocks, rose 0.21% to 5155.86 compared to the previous day. This reversed the 5.28% drop from the day before in just one day. Nvidia, known as the 'leader' in semiconductors, closed at $135.72 (185,257 KRW), up 3.13%. It recovered from falling below the $130 level in one day and approached the $140 level again. Its market capitalization also grew to $3.329 trillion, closing in on the top market cap company Apple ($3.524 trillion). TSMC and Broadcom shares also closed up 0.19% and 0.48%, respectively. Korean companies are also recovering from the previous day's shock and are on the rise. As of 9:30 a.m. that day, SK Hynix shares rose 1.38%, and Samsung Electronics shares increased by 0.67%.

Although ASML CEO Christophe Fouquet diagnosed the day before that "demand for all semiconductor chips except AI chips is depressed," the stock price movement on this day belied that statement. Ultimately, the analysis suggests that the problem lies with ASML alone, not the entire semiconductor industry. There are concerns about ASML's dominant position in the extreme ultraviolet (EUV) lithography equipment market. This equipment uses extreme ultraviolet light to etch circuits onto wafers, and ASML is the only company in the world capable of manufacturing this equipment.

Hendel Jones, CEO of semiconductor industry consulting firm International Business Strategies (IBS), said that in the processes of major companies, "the number of steps using ASML's core equipment has been reduced to about one-third." This means that companies are learning to produce independently, reducing the need to use ASML's equipment. As an example, he said Samsung Electronics could reduce the number of times it uses ASML's EUV lithography equipment from 5-6 times to 1-2 times by employing advanced etching technology. "If Samsung Electronics succeeds, the production capacity using EUV lithography equipment will significantly increase," he added. Dan Hutchison, vice president of market research firm TechInsights, supported this view, saying, "Intel, TSMC, Samsung Electronics, and others are realizing they have sufficient production capacity and are pulling back on orders." ASML almost exclusively supplies advanced semiconductor equipment to these companies. Hutchison also added, "Semiconductor manufacturers tend to purchase equipment when factory utilization rates reach the mid-90% range, but this year's utilization rate is about 81%." ASML's stock price fell another 6.4% after dropping 16.26% the previous day.

With semiconductor stocks rebounding except for ASML, the 'semiconductor winter theory' has somewhat lost its weight. This is in line with Wall Street experts in the U.S. not withdrawing their view that Nvidia will show high returns despite ASML's poor performance. Global market research firm Bernstein maintained its 'outperform' investment rating on Nvidia after ASML's earnings announcement the day before, recommending investors buy the stock. Bernstein analysts evaluated Nvidia by saying, "Opportunities related to data centers, where (AI chips are heavily used), are vast and still in the early stages," and "there is still significant upside potential in the stock price."

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