What Happened?
Shares of semiconductor equipment maker Lam Research (NASDAQ:LRCX) fell 9.7% in the afternoon session as semiconductor stocks fell after ASML, the biggest supplier of equipment used in making advanced chips, pre-announced weak earnings. ASML expects 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 are 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 (ASML) critical role in the semiconductor manufacturing process, the weak earnings and outlook could signal a possible softening in the industry.
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What The Market Is Telling Us
Lam Research’s shares are quite volatile and have had 17 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 19 days ago when the stock gained 7.5% as semiconductor stocks, especially the memory chip manufacturers, surged after Micron reported impressive fourth-quarter earnings results. Micron beat across most of the key metrics we track, including revenue, operating profit, and EPS. Notably, the company recorded a whopping 93% revenue growth compared to the previous year, showing that the AI party is still ongoing. Micron attributed the outperformance to the growing demand for memory chips that power generative AI applications.
Looking ahead, Micron provided strong sales and profitability guidance for the next quarter, which exceeded Wall Street's expectations. Overall, the result highlights the abundant growth opportunities for chip makers with technologies to accelerate the booming AI trend.
Lam Research is up 3.3% since the beginning of the year, but at $77.41 per share, it is still trading 31.3% below its 52-week high of $112.73 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 $3,198.
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