Why ASML Holding Stock Slumped Today
Key Points
Taiwan Semiconductor will continue to operate its current chip-making equipment.
While this is a setback for ASML, the company does have other clients for its next-generation machines.
A decision by one of the top names in the microprocessor industry had a negative effect on ASML Holdings (NASDAQ: ASML) stock on Wednesday. Although the news wasn't necessarily alarming, it was dispiriting enough to drive ASML's shares down by slightly over 1% that trading session.
A big customer hesitates
That monster chip company is Taiwan Semiconductor. Its co-COO, Kevin Zhang, told reporters that it had no plans to deploy ASML's cutting-edge chip-making equipment, specifically the high-numerical-aperture extreme ultraviolet (NA-EUV) lithography machines designed for next-generation processors.
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The earliest time Taiwan Semi would consider adopting the equipment is in 2029 for its A13 node.
The costs of NA-EUV equipment are steep; according to Bloomberg reporting, these sophisticated and large-scale machines can fetch at least $410 million apiece.
In a briefing for members of the press and analysts just before the opening of his company's annual Technology Symposium, Zhang implied it was comfortable with its existing low-NA EUV equipment. He said the company's research and development personnel "continue to find a way to drive technology scaling without using high-NA."
Initial overreaction
On Wednesday, ASML stock fell as much as 5.5% as investors parsed these remarks. The fact that the shares recovered relatively well from this suggests that investors are viewing it more as a setback than a damaging blow to the company's business.
I think that's a realistic way to look at it. ASML is still an important, some would say critical, company in the development and rollout of artificial intelligence (AI) hardware. Even if its high-NA gear doesn't make its way into Taiwan Semi's facilities right away, 2029 isn't very far off.
And Taiwan Semi, of course, isn't the only potential client for this equipment -- Intel purchased a set of the ASML machines and put one into operational use in April 2024.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.