AI Growth Stocks Like Texas Instruments and ASML Dipping, Wonders Rise About Other Industry Leaders
In a recent turn of events, leading semiconductor companies Texas Instruments (TI) and ASML have experienced significant sell-offs following their latest earnings reports. The sell-offs are largely attributed to investor expectations that were high going into the announcements, with the results and outlooks suggesting a more cautious near-term environment.
For Texas Instruments, despite beating earnings estimates with $1.41 per share on $4.45 billion revenue, the stock slid about 12% after hours. Analysts and the CEO signaled caution, noting that the company had strong early-quarter order patterns that may have been a pull-forward rather than sustained growth, and uncertainties around tariffs and the macro environment. This caused investor expectations to reset downward, leading to a sell-off.
ASML's decline was similarly due to a combination of running up into earnings (higher prices before results) and a shift in investor sentiment following the company's report, triggering sell-offs as expectations recalibrated.
These sell-offs in key semiconductor and equipment suppliers have broader implications for other AI-related stocks. Investors may be reconsidering the pace and sustainability of AI-driven semiconductor demand growth. The declines suggest a more cautious stance on AI growth stocks overall, recognizing that some optimism may have been priced in too aggressively ahead of earnings. This might lead to increased volatility and more selective investing within the AI sector going forward.
ASML, a Dutch company, manufactures highly complex lithography machines used in the production of semiconductor chips. In its latest quarter, ASML sold 76 lithography systems for 5.541 billion euros in net bookings. The company is highly dependent on a few key customers, such as Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel. ASML has a virtual monopoly on the latest technology in photolithography, called extreme ultraviolet (EUV).
TI, based in the US, contributes key associated infrastructure in the form of power management solutions, converters, controllers, and connectivity solutions to data centers. The company primarily deals with analog and embedded semiconductors. TI's growth has been negative over the last couple of years due to a slowdown in demand. Despite reporting solid results, TI guided for a slowdown in its upcoming third quarter.
ASML reaffirmed its 2030 targets, which guide for doubling revenue from 2024 levels and expanding gross margins. However, the company did not confirm growth in 2026 due to macroeconomic and geopolitical uncertainty. ASML Holding is down 13.6% since reporting earnings on July 16.
On the other hand, TI, which fell 13.9% from July 22 to July 25 after reporting earnings, pays a growing dividend with a 2.9% dividend yield and has 21 consecutive years of dividend growth. Despite the sell-off, TI's stock price has gone practically nowhere for the last four years, and earnings are down significantly from their peak.
It's important to note that both TI and ASML are investments in the semiconductor space, offering ways to capitalize on broader industry evolution. The S&P 500 and Nasdaq Composite closed at all-time highs on July 25, indicating a generally positive market sentiment, despite the sell-offs in TI and ASML.
ASML is sensitive to trade tensions due to its close relationship with the US through the Netherlands (as a member of the EU and NATO). The average price of a lithography system sold by ASML is $85.6 million.
In summary, the sell-offs reflect investor recalibration of optimistic expectations after earnings, with a meaningful impact on AI growth stock sentiment and potential caution for other related companies. Investors may need to approach the AI sector with increased caution and selectivity moving forward.
- The sell-offs experienced by Texas Instruments and ASML, key players in the semiconductor industry, have triggered a reconsideration of the pace and sustainability of AI-driven semiconductor demand growth.
- Despite beating earnings estimates, Texas Instruments, a US-based semiconductor company, has seen a decline in its stock price, as investor expectations for sustained growth may have been overly optimistic.
- Technology plays a significant role in the business of both Texas Instruments and ASML, with ASML manufacturing sophisticated lithography machines, a crucial component in the production of semiconductor chips, and TI contributing infrastructure solutions for data centers.
