What Happened?

A number of stocks fell in the morning session after a cautious outlook from semiconductor equipment giant ASML sparked a broad sell-off across the sector, hitting chipmakers and equipment suppliers alike. 

The negative sentiment was triggered after the Dutch firm, whose complex machines are essential for producing advanced chips, warned it could no longer guarantee growth in 2026. ASML's management cited "increasing uncertainty driven by macro-economic and geopolitical developments," including the potential for new U.S. tariffs. As an industry bellwether, a company whose performance is seen as an indicator of the entire sector's health, ASML's comments are a key signal of future capital spending. The warning sent a chill through the market, as concerns grow that trade tensions could disrupt the highly globalized semiconductor supply chain and slow down investment from chip manufacturers.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Processors and Graphics Chips company Penguin Solutions (NASDAQ: PENG) fell 3.4%. Is now the time to buy Penguin Solutions? Access our full analysis report here, it’s free.
• Analog Semiconductors company Monolithic Power Systems (NASDAQ: MPWR) fell 3.1%. Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.
• Analog Semiconductors company Impinj (NASDAQ: PI) fell 3.2%. Is now the time to buy Impinj? Access our full analysis report here, it’s free.
• Processors and Graphics Chips company Lattice Semiconductor (NASDAQ: LSCC) fell 3.2%. Is now the time to buy Lattice Semiconductor? Access our full analysis report here, it’s free.
• Analog Semiconductors company Himax (NASDAQ: HIMX) fell 3.4%. Is now the time to buy Himax? Access our full analysis report here, it’s free.

Zooming In On Penguin Solutions (PENG)

Penguin Solutions’s shares are very volatile and have had 27 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 1 day ago when the stock gained 3.3% as the company continued to benefit from positive sentiment following a strong earnings report and a price target increase from a Wall Street analyst. Loop Capital raised its price target on Penguin Solutions to $35 from $30 on Monday, maintaining a "Buy" rating. The firm cited the company's promising developments in the commercial Artificial Intelligence (AI) sector as a key driver. This follows the company's recent earnings report on July 8th, where it beat earnings per share (EPS) estimates.

Penguin Solutions is up 27.3% since the beginning of the year, but at $24.59 per share, it is still trading 10.5% below its 52-week high of $27.46 from July 2024. Investors who bought $1,000 worth of Penguin Solutions’s shares 5 years ago would now be looking at an investment worth $1,765.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.