The stock of European semiconductor businesses less exposed to AI chips fell sharply on Thursday due to a wider industry downturn as well as dwindling demand from their significant automotive and industrial clients.
A wider industry downturn combined with declining demand from their major automotive and industrial clients caused shares of European semiconductor companies less exposed to AI chips to plunge on Thursday. Chip component suppliers are more susceptible to the growing AI chip industry and demand from high-end tech clients like Nvidia (NVDA.O), TSMC (2330.TW), Intel (INTC.O), and ASML (ASML.AS), opens new tab, and ASM International (ASMI.AS), opens new tab.
According to ING analyst Marc Hesselink, “the more high-end applications linked to AI, those are doing much better.” Hesselink noted that they could experience a “correction” in stock prices following this year’s high rises and concerns about the effects of trade disputes between the US, Europe, and China. Early afternoon trading saw a 3% decrease in shares of ASML and ASMI. Conversely, businesses with little exposure to AI suffered more from automakers canceling orders and industrial clients. In Europe, the market for electric cars has drastically declined.
STMicroelectronics (STMPA.PA), a supplier to Tesla, had a 14% decline after lowering its 2024 revenue and profit objectives for the second time this year due to a decline in automotive demand and improving orders from industrial customers. The leading provider of automotive chips, Germany’s Infineon (IFXGn.DE), saw a 6% decline. Due to sluggish demand from automotive customers, Dutch company NXP Semiconductors (NXPI.O), which opened a new tab earlier this week, posted its lowest quarterly sales decline in four years, which hurt some US peers with exposure to the car industry.
Moreover, Siltronic (WAFGn.DE), a German producer of chip materials, increased its forecast and opened a new tab. This was mostly because the company predicted that the AI market would expand this year. Despite growing orders for its AI systems, BE Semiconductor Industries (BESI.AS) had a 13% decline in stock price after projecting flat third-quarter sales. The company was hampered by lackluster development in mainstream assembly markets, particularly in China. The semiconductor stocks, namely Ams OSRAM, which fell 7% ahead of Friday’s results, STMicro peer Melexis (MLXS.BR), Technoprobe (TPRO.MI), Soitec (SOIT.PA), and Nordic Semiconductor (NOD.OL), opened new tabs that were down 2.8% and 3.0%, respectively, on Europe’s STOXX 600 Technology index (SX8P).
Hesselink stated that the sector’s fundamentals are still solid. Businesses continue to believe that long-term demand for EVs will be strong. STMicro’s CEO, Jean-Marc Chery, stated during a conference call that silicon carbide, in particular, will be a growth driver for chip components related to electric vehicles in the second half of the year.
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