ASML (NASDAQ:ASML)'s revised outlook raises industry concerns

ASML Holding (ASML) extended its losses in pre-market trading on Wednesday after the Dutch chip equipment maker revised its FY25 revenue forecast and suggested weaker demand for chips outside the AI ​​sector.

The company's disappointing outlook impacted global chip stocks on Wednesday, raising concerns about slowing demand and oversupply in the chip market. Let's examine ASML's forecast and its potential impact on chip stocks in detail.

ASML issues revised outlook for FY25

The company reported its third quarter results and revised its net sales forecast for FY25. Sales are expected to be between €30 billion and €35 billion ($32.7 to $38.1 billion). This forecast is at the lower end of the company's previous estimates. Adding to ASML's problems are the company's net bookings €2.6 billion ($2.83 billion) in the third quarter was below analysts' expectations €5.6 billion.

Additionally, ASML CEO Peter Wennink warned that the market recovery was slower than expected and demand for chips, with the exception of AI chips, was weak. In addition, the company is encountering difficulties due to export restrictions imposed by the US and Dutch governments on its chip manufacturing equipment, which have impacted its operations in China.

How does ASML's revised outlook impact other chip companies?

ASML's revised outlook has raised fears about slowing chip demand and overcapacity. This comes as analysts suspect that several chipmakers such as TSMC (TSM) and Intel (INTC) have accumulated ASML's tools during the pandemic and are now operating more efficiently. As a result, these companies can produce more chips with their current equipment, which has reduced demand for new orders.

Furthermore a Reuters A report quoted Dan Hutcheson, vice chairman of analyst firm TechInsights, as saying that ASML's customers, including Intel and TSMC, are delaying new orders as chip factory utilization is at 81% this year. Hutcheson points out that manufacturers generally only increase tool purchases when factory utilization increases into the mid-90 percent range.

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