Tech stocks got pummeled yesterday, helping drag down the averages. But stocks are stabilizing in the early going today. Gold is rallying back toward $2,700 an ounce, while crude oil, Treasuries, and the dollar are flattish.
Chip stocks cracked yesterday after ASML Holding NV (ASML) warned that its 2025 sales wouldn’t live up to expectations. The company makes advanced chip equipment used to produce complicated semiconductors, and it said next year’s sales would come in somewhere between 30-35 billion euros.
That bottom-of-the-barrel forecast caused the stock to plummet more than 16%, its biggest drop in a quarter-century. It also dragged down other semi stocks, with the largest US and Asian players losing roughly $420 billion in market cap on the day.
ASML, SOXX, NVDA (YTD % Change)
Data by YCharts
Some investors are concerned there is too much production capacity and not enough end-user demand for chips. But other experts cite still-strong demand for advanced Artificial Intelligence (AI) gear as a bullish sector catalyst. Names like Nvidia Corp. (NVDA) have benefitted greatly from that, with the stock (still) up 173% year-to-date, far outpacing the 19% gain in the iShares Semiconductor ETF (SOXX).
Finally, new Federal Trade Commission (FTC) rules that will take effect next year could cause bottlenecks in the M&A process. More information will be collected as part of US antitrust reviews, which may add to the time and expense of corporate buyouts – particularly when the buyer is a private equity firm. That said, the rules may still get challenged in court.
