The first and third of this trio, NVDA and TSM, are hitting all-time highs. ASML, in contrast, has lost 30% of its value since June–the largest chunk of that fall on the company’s disappointing earnings announcement earlier this week. What’s going on?
Two decades or so ago, Intel (INTC) was the premier chipmaker in the world, designing and manufacturing the most advanced semiconductors. TSM was a close second, manufacturing chips for third-party designers–and slowly gaining on INTC. Today, INTC seems to me to be the Boeing (BA) of chipmakers–that is, a company run by marketing and finance bros that decided cost control was a better way to boost profits than being on the cutting edge of product excellence. Today, TSM is the undisputed leader in chip manufacturing. So it makes sense that, in spite of quirks in the Taiwan equity market, its stock should continue to do well.
NVDA dipped on its latest earnings report, when the company said it was having problems–apparently since fixed–with the design of its newest AI chip. Yes, trees don’t grow to the sky, but despite its near tripling year-to-date, it also seems sensible to me that the stock keeps on performing. At some point we’ll have to deal with the possibility that customers like GOOG, MSFT or META will begin to satisfy some of their needs with AI chips they design themselves, but this is more something to be aware of than an actual “today” issue.
Two things appear to me to have hurt ASML. One is sanctions on sales to China. The second is internal problems at INTC and possibly Samsung that have apparently delayed orders. We can see the INTC issues pretty clearly, I think. On the one hand, Washington wants INTC to remain/become a national champion, home-grown maker of advanced semiconductors. On the other, the internal issues with INTC seem to be bigger–and more deeply entrenched–than I had realized. Government funding may also be not yet in the company’s hands.
Why didn’t ASML give some hint to the market that analyst estimates were too high? That’s what would have happened in the US. My short answer is I have no idea. A longer but equally unsatisfying one is that Europe is full of relatively small national markets, each with its own quirks. Other than the UK, I’ve made the effort to learn them.