ASML Share Plunge: Why Has This Chip Equipment Company Lost Nearly 20% Of Its Value?

When it comes to semiconductors and investing, all anyone ever seems to talk about is Nvidia (to the mooooooooon!)—the chip designer that’s seen massive share price gains.

But another name has recently made headlines for a very different reason. ASML, a Dutch company, saw its share price plummet nearly 20% in just a few days in mid-October.

While Nvidia designs the chips that power Artificial Intelligence (AI) algorithms, it’s just one piece of the semiconductor puzzle. Producing a semiconductor is an intricate process, involving hundreds of millions of dollars and multiple specialized companies, each playing a critical role.

One of the most essential players? ASML—the company that builds the cutting-edge machinery enabling semiconductor production.

Here’s what you need to know about ASML and why its stock has been in the red lately.

 

Overview of ASML’s recent performance

First, let’s set the stage with some background info on what the company really does. ASML is a crucial part of the whole semiconductor supply chain. It’s so important because it makes highly-specialised machines that are capable of producing the most technologically cutting-edge semiconductors in the world.

In fact, it has a monopoly on these types of machines that are required to produce them. Named extreme ultraviolet (EUV) lithography machines, they are works of engineering marvel. ASML’s machines have incredible precision and its lasers can etch chip blueprints (designs) onto silicon wafer with insane precision; to within a single atom of its target.

All this has meant that ASML has built up a reputation for being at the forefront of technological progress in the chip manufacturing space. Its biggest client is the world’s largest manufacturer of semiconductors—Taiwan Semiconductor Manufacturing Co, that’s also known as just “TSMC”. 

TSMC makes semiconductors in its factories, using ASML machinery, and now produces advanced chips with transistors as small as 3 nanometres (nm) wide. For context, human hair is anywhere from 50,000 to 100,000 nm wide! 

Recently, ASML’s share price cratered by over 20% in just 2 days. That’s in stark contrast to its 5-year share price gain of over 170%, proof of its resounding success over the longer term. Here’s why ASML shares fell by so much, so quickly.

 

Key factors behind the share price plunge

The main problem for ASML was that it released quarterly earnings which shocked the market…and not in a good way! Typically, financial markets have expectations of how well big companies will do when they report their quarterly financial results.

That was the case with ASML yet the company disappointed investors with some numbers that raised questions on its immediate outlook. First off, it didn’t have a great start to its earnings release as a supposed “technical error” led the company to erroneously publish its earnings a day before they were scheduled to hit the market. ASML quickly took down the earnings but then released them in full later in the day.

 

Bookings miss and China worries

With a company like ASML, a lot of investor attention focuses on the number of “bookings” that have from clients. That’s basically a term for new orders of their chip-producing machines. It was on this bookings metric that the company fell short. ASML recorded bookings of just €2.6 billion for the third quarter of 2024. 

That was way off the average expectation of investors of €5.39 billion for the period. Additionally, that number was down from Q2 2024, when ASML posted €5.6 billion in bookings. The fact that ASML management also projected lower revenue in 2025 for the company, than they have previously stated, helped pile on further misery for investors.

This horrible miss in bookings saw both its Amsterdam-listed and NASDAQ-listed shares drop over 15%. The main concern for investors was that the poor number in bookings indicates that companies within the semiconductor supply chain just aren’t all that keen to spend on ASML’s machines. 

Finally, there were also big question marks around how much the company is exposed to the increasing wave of sanctions against selling advanced semiconductor machinery to China. In terms of a geographic breakdown, sales to China actually made up 49% of ASML’s overall revenue in Q3 2024; not exactly insignificant! 

In short, given ASML’s dominant position in the whole manufacturing process, that could be a sign that there’s overall weak demand in the semiconductor space. The added worries over whether China demand would also fade in the short to medium term weighed on the stock. Not an ideal scenario if your whole business is based on selling machines that make these chips, particularly to big countries like China!

 

Impact on the semiconductor industry

After the initial share price drop in ASML on 15 October, the news of weak bookings also hit the share prices of other semiconductor companies. On the same day, Nvidia saw its share price fall 4.7%, AMD shares fell 5.2%, and TSMC saw its New York-listed shares decline by 2.6%.

Obviously, there were some concerns over whether this whole “AI party” in the stock markets could continue on or would investors be left with a seriously bad hangover? Nvidia has huge demand for its AI chips from all manner of tech companies, like Tesla, Microsoft, Amazon, and Alphabet, all of whom need these chips to process algorithms and run complex AI programming.

Overall, though, the fallout in the industry ended up being relatively temporary and–instead of it being a critical injury with huge blood loss–it ended up being more like a small cut. That’s mainly down to the fact that TSMC released its quarterly earnings only 2 days after ASML and the Taiwanese manufacturer had some amazing numbers that didn’t show any signs of weakness in demand. It was so awesome that TSMC shares ended the day nearly 10% higher.

 

Investor relations and market sentiment

It’s been a relatively benign week or so since all the drama from ASML’s initial earnings release. In fact, ASML shares have gained 5.5% in nearly a week since their over-20% drop. Following the earnings, there were a few analyst downgrades and, as expected, some adjustments in their “target prices” for ASML stock.

That’s normal behaviour from analysts, who tend to focus on the short term (1-2 years) instead of looking at the long-term potential of a company. Just like any of us, though, they are making an educated guess on how they see ASML’s business performing within these timeframes.

With that, we should take their recommendations and price targets with a pinch (or bucket!) of salt when assessing the outlook for any related companies. Many analysts are now projecting lower revenues next year while also trying to estimate any further fallout from restrictions surrounding sales to China, which is nearly impossible to predict.

 

Future outlook for ASML

Overall, it wasn’t a pretty quarter for ASML but the biggest story from the results was its huge miss in bookings. That spooked the stock market more than an edge-of-your-seat Japanese horror film. And, like in any horror film, there were casualties; the main one being ASML’s stock price.

However, ASML continues to maintain its monopoly over the machinery that is crucial to producing the latest (and best) semiconductors. That isn’t set to change any time soon. Even with the poorer bookings, the company did state that demand in AI-related sectors remains strong. The miss on bookings, which wasn’t clearly outlined, was more likely to do with delays in constructing big chip plants, such as a couple Intel are building in Germany and Poland.

With the company continuing to innovate and iterate on a next-gen EUV lithography machine, its dominant position in the chip industry is likely to remain unchallenged. 

 

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