What Happened?
Shares of semiconductor equipment maker Lam Research (NASDAQ: LRCX) fell 3.2% in the morning session after fellow semiconductor equipment giant ASML Holding (ASML) warned it could no longer confirm growth in 2026.
The negative sentiment spread across the semiconductor equipment sector, dragging down peers like Applied Materials and KLA Corp. ASML, a critical supplier to the chip industry, cited increasing uncertainty from macroeconomic and geopolitical developments, specifically mentioning potential U.S. tariffs, as the reason for its cautious stance. Although ASML beat second-quarter expectations, its warning about 2026 and a weaker-than-expected third-quarter forecast overshadowed the positive results. The announcement from the world's largest chip-equipment maker has created headwinds for the entire industry, raising investor concerns about future growth prospects amid global trade tensions.
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What Is The Market Telling Us
Lam Research’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 biggest move we wrote about over the last year was 9 months ago when the stock dropped 9.7% on the news that semiconductor stocks fell after ASML, the biggest supplier of equipment used in making advanced chips, pre-announced weak earnings.
ASML guided for fiscal year 2025 sales to come in between 30 billion euros and 35 billion euros, at the lower half of the range it had previously provided. Similarly, bookings for the quarter were reportedly below expectations.
Reuters noted that the quarterly earnings numbers were mistakenly published a day earlier than expected. Management noted that while the potential in the AI (artificial intelligence) market remained strong, other markets were taking too long to recover, with the observed trend expected to continue into 2025.
Lastly, CFO Roger Dassen projected China's contribution to overall revenue to be around 20% (down from the recent estimate of 49%), hinting at potential weakness in the region.
ASML's technology is used by chipmakers like Nvidia, AMD, Intel, and Samsung to make advanced chips, including those specially designed for AI workloads. Given the company's critical role in the semiconductor manufacturing process, the weak earnings and outlook could signal a possible softening in the industry.
Lam Research is up 34.3% since the beginning of the year, but at $97.38 per share, it is still trading 9.5% below its 52-week high of $107.60 from July 2024. Investors who bought $1,000 worth of Lam Research’s shares 5 years ago would now be looking at an investment worth $2,822.
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