Proactive Investors - Shares in global semiconductor giants from Nvidia Corporation to ASML Holding NV (AS:ASML) remain under pressure following reports that Taiwan Semiconductor Manufacturing Company, the world’s largest microchip manufacturer, is growing skittish over global demand for high-end microchips.
A Reuters article published last Friday reported that TSMC asked suppliers to delay the delivery of high-end chipmaking equipment, indicating that demand may be cooling.
Though the market was spooked by the report, it was not without precedent, given recent comments made by TSMC chief executive C.C. Wei.
Wei warned back in June’s second-quarter earnings call that “while we have recently observed an increase in AI-related demand, it is not enough to offset the overall cyclicality of our business”.
TSMC told investors to expect full-year sales to drop by as much as 10%, with capital expenditure increases contributing to tighter margins.
Wei cautioned that persistent weaker overall macroeconomic conditions, slower-than-expected demand recovery in China, and overall softer end-market demand conditions cannot be ignored in the short term.
Smartphones, a key market for the semiconductor industry, are facing a global demand slump, something which is a cause for concern at newly listed semiconductor designer Arm Holdings (NASDAQ:ARM), whose technology is found in virtually every handset in the world.
Although Arm’s IPO last Thursday was a hit, with shares rallying 20% on the first day despite fears of an overvaluation, shares in the UK-headquartered company fell 4.5% on Friday and are expected to open another 2.7% lower today.
Dutch group ASML, which supplies TSMC with highly specialised machinery essential for manufacturing microchips, stands to lose significant revenues should its largest customer begin reducing output.
ASML shares fell 4% following Friday’s announcement, and are expected to open 0.4% lower when Nasdaq opens today.
Semiconductor megacap Nvidia also felt the strain, getting knocked 3.7% lower on Friday and a further 2% in this morning’s pre-trading session.
The same can be said for Nvidia’s largest competitor in the GPU market Advanced Micro Devices (NASDAQ:AMD) Inc, which fell 4.8% on Friday and nearly 1% in this morning’s pre-trading session.