The lower the AI exposure, the bigger the problem for Europe's chip firms
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
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