Why ASML stock is down today

ASML Holding (ASML -3.14%) was among the semiconductor companies enjoying rising sales due to increased artificial intelligence (AI) spending. But its stock has been falling, and shares fell again Wednesday morning.

ASML last reported quarterly earnings on July 17, and the stock has fallen nearly 25% since then. That includes a 3.9% decline since 11:55 a.m. ET Wednesday. The latest drop came after a Wall Street analyst who had previously been bullish on the stock publicly reversed his stance.

ASML’s sales growth faces headwinds

ASML supplies the semiconductor industry with the lithography machines it needs to produce computer chips — and is the only manufacturer of the extreme ultraviolet (EUV) lithography machines needed to produce the most advanced chips that are flying off the shelves as a result of calculation request. power for AI training and other needs. Over the past year, ASML’s share price has soared as its revenue has risen nearly 25% since the start of 2023 on a trailing 12-month basis.

But in a new research note, UBS analyst Francois-Xavier Bouvignies downgraded his recommendation on ASML from buy to neutral (hold) and wrote that he believes the stock will not move as high as previously expected.

While Bouvignies still sees near-term potential from ASML’s strong order book, he believes the current situation may be a short-term peak for the business. The analyst believes the consensus outlook for earnings over the next one to two years is too high and says now is not the time to be a buyer of ASML stock.

Image source: ASML Holding.

ASML lithography systems can be vital hardware for semiconductor manufacturers scaling up production. But many customers may now have the production capacity they need, which could mean a future decline in new orders. The future of the Chinese market is also a big question for ASML and others in the industry.

Bouvignies expects Chinese spending on chip manufacturing equipment to drop significantly in both 2025 and 2026. In addition, the Chinese government has already threatened to shut down ASML in response to new U.S. and Dutch restrictions on chip exports. technology to China.

Investors are likely to see more volatility in the chip sector and ASML stock in particular. But investors can usually ignore short-term noise when it comes to long-term holdings.