ASML’s 5% Drop Weighs on European Tech as AI Returns Come Under Scrutiny
Key Facts
ASML shares fell about 5% in Amsterdam on Friday, October 30, in a technology stock sell-off sparked by investor concerns about returns on AI spending. Reuters said results from Amazon and Intel in the United States revived concerns about the rising cost of building the infrastructure needed for the technology, prompting investors to cut their exposure to technology stocks globally. The decline came after ASML reported strong quarterly results and forecast high annual revenue, setting its operating performance against market questions about when demand will translate into measurable profits and returns. The European STOXX 600 closed down 0.36% at 646.75 points, despite recording its best month since June. The European technology sector fell 2.75%, its worst day since July 7.
ASML said on October 14 that third-quarter net sales were €11.7 billion and net income was €5.0 billion, while its gross margin reached 57.5%. Those figures provided a strong operating base ahead of the final quarter, but did not keep the company’s shares from joining the sector-wide decline. The company expects fourth-quarter net sales of between €14.2 billion and €15.2 billion, with a gross margin of about 57%. For the full year, it targets net sales of between €44 billion and €45 billion and a gross margin of about 56%. The forecasts show sales continuing to grow from the third to the fourth quarter, while investors’ concerns center on the cost of investment and how long it will take to generate a return.
The pressure spread to European semiconductor manufacturers, with shares of STMicroelectronics, BESI and Infineon falling between 3.3% and 4.8%, according to a Reuters report. The report linked the move to results from Amazon and Intel, which brought concerns about the cost of building data centers and AI infrastructure back to the fore. An analyst at Capital.com said that “strong demand for AI is no longer enough on its own” to convince investors. This reflects a shift in focus from expected demand to companies’ ability to turn spending into returns, at a time when infrastructure requires substantial investment. An analyst at MCH Market Insights said investors were weighing the scale of capital spending against the time needed to generate a return, adding: “Right now, they don’t have an answer to that.”
The questions extend beyond chipmakers to the case for investing in broader digital infrastructure. An Associated Press report said investors are questioning whether the hundreds of billions of dollars invested will generate enough profits and productivity to justify the spending. The report also noted that higher interest rates could slow data center expansion. Illustrating the scale of the commitments, Amazon Chief Executive Andy Jassy told investors he expects the company to spend $220 billion during 2026, most of it on building AI data centers. The company recorded a free cash flow loss of $42.4 billion in the 12 months ended in September, while its shares fell as much as 7% in extended trading after the results.
Intel’s results also weighed on broader market sentiment: its shares fell 23% in after-hours trading after it warned about personal computer revenue. Reuters said the drop reflected a broader sell-off in technology stocks following a warning that sector revenue would be weak through the first half of next year. For ASML, the market pressure coincides with expectations for strong demand for chipmaking equipment in the coming years. The company said its planned 30% increase in production capacity in each of 2027 and 2028 would not be enough to meet expected demand, and that it was considering expanding capacity further. This puts expectations of strong demand alongside the challenge of increasing supply and the spending required to meet it.
Customers’ discussions about orders for ASML equipment extend into 2029 and 2030, according to Reuters. However, the company has held off on accepting orders for those years while it assesses customers’ readiness and its own ability to meet future demand. That caution suggests a longer demand horizon alone does not settle the timing of production commitments, while the scale of spending and expected returns remain central to investors’ assessment. In the near term, markets are watching whether ASML delivers on its fourth-quarter sales forecast of between €14.2 billion and €15.2 billion, following sales of €11.7 billion in the third quarter. They will also track whether its capacity expansion plans can keep pace with the demand it expects in 2027 and 2028.