Key Points
ASML followed Nvidia stock lower today.
The AI boom is alive, but investors seem to think stocks like ASML are oversold.
The chip equipment maker's revenue growth is expected to accelerate over the coming quarters.
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Shares of ASML (NASDAQ: ASML) were trending lower today even though there was no major news out on the semiconductor equipment manufacturer. Instead, the stock fell as part of a broader sentiment shift following Nvidia's (NASDAQ: NVDA) earnings report last night as investors shrugged off better-than-expected results from the AI chip leader.
As of 11:43 a.m. ET, ASML stock was down 4.9%, while Nvidia had lost 4.6%.
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What happened with ASML
There wasn't a clear fundamental reason for the sell-off in chip stocks. Instead, investors seemed to have decided that the sector was overbought following a surge in recent months, and some investors seemed to rotate into beaten-down software stocks, which were climbing today even as the Nasdaq Composite was down more than 1.5%.
There's a fair argument that ASML is now overbought as the stock, which is the world's only maker of extreme ultraviolet lithography (EUV) equipment, had doubled over the last six months before today's slide, even though it hasn't enjoyed the spoils from the AI boom that Nvidia has. Its price-to-earnings ratio is currently 50, which is higher than even Nvidia.
Where does ASML go from here?
ASML is in an enviable position with a monopoly on EUV equipment, and revenue growth is expected to pick up as capital spending in the industry flows through the cycle to manufacturers like TSMC.
However, given the recent surge in the stock, investors should have measured expectations over the near-term, as it would take a significant surprise from ASML to give the stock another leg up.
The sell-off following the Nvidia report shows investors seem to think that AI stocks deserve a breather after climbing so high.
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Jeremy Bowman has positions in ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends ASML, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
