The lower the AI exposure, the bigger the problem for Europe's chip firms
25/07/2024 12:58
By Olivier Sorgho and Nathan Vifflin
July 25 (Reuters) - Shares in European semiconductor
firms less exposed to AI chips slumped on Thursday as falling
demand from their key automotive and industrial clients hit
business prospects, on top of a wider sector correction.
Chip component suppliers like ASML ASML.AS and ASM
International ASMI.AS are more exposed to the booming AI chip
market and demand from high-end tech clients like Nvidia
NVDA.O , TSMC 2330.TW , and Intel INTC.O .
"The more high-end applications, linked to AI, those are
doing much better," said ING analyst Marc Hesselink.
But even they aren't immune to a "correction" in stock
valuations after strong rallies this year, coupled with worries
around the impact of trade spats involving China, the U.S. and
Europe, Hesselink added.
Shares in both ASML and ASMI were down about 3% in early
afternoon trading.
Companies with less AI exposure meanwhile were hit harder by
industrial clients and automakers cutting orders. Demand for
electric vehicles has slowed sharply in Europe.
STMicroelectronics STMPA.PA , which supplies Tesla, tumbled
14% after it cut 2024 sales and margin targets for a second time
this year, as orders from industrial customers did not improve
and automotive demand fell.
Germany's Infineon IFXGn.DE , a top automotive chip
supplier, fell 6%.
Dutch company NXP Semiconductors NXPI.O earlier this week
reported its worst decline in quarterly revenue in four years on
weak demand from automotive customers, dragging down some U.S
peers with auto exposure.
And while German chip materials supplier Siltronic
WAFGn.DE raised its guidance, that was mostly due to the AI
market which it said would grow this year.
BE Semiconductor Industries BESI.AS slumped 13% after
forecasting flat third-quarter sales, hit by weak growth in
mainstream assembly markets, particularly in China, even as
orders for its systems used in AI grew.
Europe's STOXX 600 Technology index .SX8P was down 2.8%,
largely dragged by semiconductor stocks including ams OSRAM
AMS.S that fell 7% ahead of results on Friday, STMicro peer
Melexis MLXS.BR falling 4%, and Technoprobe TPRO.MI , Soitec
SOIT.PA and Nordic Semiconductor NOD.OL also down.
The sector's fundamentals remain strong, Hesselink said.
Companies still hope that EV demand will be robust in the longer
term.
Chip components related to EVs, particularly silicon
carbide, will be a growth driver in the second half of the year,
STMicro's CEO Jean-Marc Chery said in a conference call.
(Reporting by Olivier Sorgho and Nathan Vifflin in Gdansk;
editing by Milla Nissi)
((Olivier.Sorgho@thomsonreuters.com;))