Overview of ASML’s Forecast Revision
I mean, look, when it comes to ASML, again, everything is driven by CapEx. And when I say CapEx, it’s really coming from the foundry guys like TSMC and Samsung. We know Samsung had layoffs recently, so clearly they are not doing very well. But TSMC is. So the fact that their buyers are so concentrated and the geopolitical tensions continue, and you know, the second half estimates, the comps are tougher. To me, this is just a sign of expectations kind of going up to the point where you will not see any positive revisions from the print this quarter. And that’s what happened with ASML. Expectations had gone up and they didn’t surprise to the upside. So we could expect the same from others.
Impact of the Miss on Orders
The magnitude of the miss on the orders versus the estimate seemed huge to me. Yes, that’s typical or not. Typically, when they miss, they really miss. Well, that comes down to how semis typically are. When you go back to prior cycles, when these companies miss, they miss big. We have seen that with Micron; we have seen that with some of the other names. But in the case of ASML, the secular drivers are intact. When you think about, you know, every foundry looking to use their machines, looking to go to the smaller nodes, TSMC is actually doing very well. So they are their largest customer. And when you think about, you know, how well TSMC has done in terms of their revenue, I don’t think they are cutting back CapEx. But it’s always about that incremental buyer when it comes to these semi companies, especially the ones that are reliant on CapEx spend.
The Role of Incremental Buyers
And if you take China out of the equation, or the fact that they are restricted in some way, those are some of your incremental buyers. So that’s where it has an impact. We have a great function on the terminal. It’s SP LC; it’s a supply chain analysis. So if you type in ASML and then go to the supply chain, you can see who their competitors and their customers are. So competitors are Applied Materials, KLA, Lam Research. So you can kind of see all of them are going to be down on this news.
Customer Landscape
And then demand gives point. Customers are folks like TSMC, Samsung, Intel, although albeit not a huge customer anymore. But you know the problems that Intel has had with semiconductor manufacturing. Micron, so watch that stock. SK Hynix, am I saying next? Yep, yep. And then you have global foundries as well.
Nvidia’s Position in the Market
This is a really ignorant question. Where does Nvidia sit in this story that we’re talking about? Well, Nvidia is sort of the first derivative. So if TSMC is not buying machines from ASML, that means they are not expanding their supply for, you know, the latest call for packaging and the foundry side in terms of manufacturing Nvidia’s chips.
Future Implications
So TSMC determines what kind of capacity expansion they are looking for for 2025 and beyond. And based on that, they are placing an order for ASML equipment. So it is a very big sign. And to your point about Intel being a buyer, well, Intel is under pressure to curtail their CapEx as well. So you’re taking a lot of the incremental buyers out of the equation, even though there is no substitute for ASML. So it’s not as if ASML is losing market share to anyone. It’s just that the incremental buyers are fewer compared to where they were, you know, a couple of quarters back.