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Yesterday, semiconductor stocks declined due to a surprise earnings release by Dutch semiconductor giant ASML Holding ((ASML - Free Report) ). ASML’s earnings were released yesterday on the company’s website due to an apparent technical error. ASML, which counts Taiwan Semiconductor ((TSM - Free Report) ), Intel ((INTC - Free Report) ), and Samsung Electronics as its largest clients, beat Wall Street expectations handily but provided weak forward earnings guidance, citing slower expected demand for AI-related chips. The news led to a 16% haircut for ASML shares as volume swelled to 5x the norm.
However, the poor performance was not secluded to ASML; the weakness in ASML reverberated throughout the semiconductor industry, and the Semiconductor ETF ((SMH - Free Report) ) dove more than 5% on the news. Is the party finally over in semiconductors, or is it time to again buy the dip?
Nvidia Demand Remains Strong
One of my favorite metaphors for the stock market is from Wayne Gretzky, the greatest hockey player of all time. Gretzky once lamented that hockey players should “Skate to where the puck is going, not to where it has been.” The thought process “The Great One” used for hockey is the same one that savvy investors use and the one that the Zacks Rank is based on. Rather than trading off the past, stocks discount the future.
Though ASML is an integral player in the AI realm, the best proxy for investors to consider is Nvidia ((NVDA - Free Report) ), the undisputed AI leader.
Supply Problem, Not Demand
The Zacks Rank processes information from roughly 3,000 analysts at over 150 Wall Street firms. The latest Zacks Consensus Estimates for Nvidia shows that demand will not slow any time soon. Zacks Consensus Estimates suggest that NVDA’s earnings will more than double in 2025 and will increase ~33% in 2026.
Image Source: Zacks Investment Research
Meanwhile, NVDA CEO Jensen Huang confirmed that demand for its new Blackwell chip is “insane” in a recent interview on CNBC.
Bullish Technical Picture
Semiconductors such as Arm Holdings ((ARM - Free Report) ) and NVDA were due for a retreat. For example, ARM jumped more than 25% in a single week after finding buyers off its 200-day moving average. After such a big run, some backing and filling is common, but this does not necessarily mean the run is over.
Image Source: TradingView
Furthermore, ASML is not a good barometer for semiconductors. The stock’s price action has lagged for months, even before the company reported lackluster earnings.
Image Source: Zacks Investment Research
Bullish Options Positioning
Deep-pocketed call buyers bought millions of dollars worth of the 2x Long NVDA ETF ((NVDL - Free Report) ) during yesterday’s dip, signaling bullish conviction by smart money investors.
Bottom Line
ASML’s lackluster earnings report caused semiconductors to decline yesterday. Nevertheless, Wall Street’s expectations, technical factors, and the options market suggest that investors should buy the dip.
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ASML EPS Hits Semis: 5 Reasons to Buy the Dip
Semiconductors Slump After ASML Results Released
Yesterday, semiconductor stocks declined due to a surprise earnings release by Dutch semiconductor giant ASML Holding ((ASML - Free Report) ). ASML’s earnings were released yesterday on the company’s website due to an apparent technical error. ASML, which counts Taiwan Semiconductor ((TSM - Free Report) ), Intel ((INTC - Free Report) ), and Samsung Electronics as its largest clients, beat Wall Street expectations handily but provided weak forward earnings guidance, citing slower expected demand for AI-related chips. The news led to a 16% haircut for ASML shares as volume swelled to 5x the norm.
However, the poor performance was not secluded to ASML; the weakness in ASML reverberated throughout the semiconductor industry, and the Semiconductor ETF ((SMH - Free Report) ) dove more than 5% on the news. Is the party finally over in semiconductors, or is it time to again buy the dip?
Nvidia Demand Remains Strong
One of my favorite metaphors for the stock market is from Wayne Gretzky, the greatest hockey player of all time. Gretzky once lamented that hockey players should “Skate to where the puck is going, not to where it has been.” The thought process “The Great One” used for hockey is the same one that savvy investors use and the one that the Zacks Rank is based on. Rather than trading off the past, stocks discount the future.
Though ASML is an integral player in the AI realm, the best proxy for investors to consider is Nvidia ((NVDA - Free Report) ), the undisputed AI leader.
Supply Problem, Not Demand
The Zacks Rank processes information from roughly 3,000 analysts at over 150 Wall Street firms. The latest Zacks Consensus Estimates for Nvidia shows that demand will not slow any time soon. Zacks Consensus Estimates suggest that NVDA’s earnings will more than double in 2025 and will increase ~33% in 2026.
Image Source: Zacks Investment Research
Meanwhile, NVDA CEO Jensen Huang confirmed that demand for its new Blackwell chip is “insane” in a recent interview on CNBC.
Bullish Technical Picture
Semiconductors such as Arm Holdings ((ARM - Free Report) ) and NVDA were due for a retreat. For example, ARM jumped more than 25% in a single week after finding buyers off its 200-day moving average. After such a big run, some backing and filling is common, but this does not necessarily mean the run is over.
Image Source: TradingView
Furthermore, ASML is not a good barometer for semiconductors. The stock’s price action has lagged for months, even before the company reported lackluster earnings.
Image Source: Zacks Investment Research
Bullish Options Positioning
Deep-pocketed call buyers bought millions of dollars worth of the 2x Long NVDA ETF ((NVDL - Free Report) ) during yesterday’s dip, signaling bullish conviction by smart money investors.
Bottom Line
ASML’s lackluster earnings report caused semiconductors to decline yesterday. Nevertheless, Wall Street’s expectations, technical factors, and the options market suggest that investors should buy the dip.