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ASML’s stock plummeted after it released its Q3 earnings a day before schedule. The Dutch chipmaking equipment supplier announced a decrease in net bookings, a shock for investors expecting growth. 

Reported net bookings decreased from 5.57 billion in Q2 to 2.63 billion, missing consensus estimates by a whopping 2.73 billion. ASML also reported disappointing earnings growth. It is expected to grow by 7-25%, a sharp decrease from the previous outlook of 43%. Furthermore, the increase in earnings per share missed analyst expectations by 0.28 euros. 

Other reasons for the drop in Share Prices?

ASML is a world leader in supplying DUV systems which etch circuit patterns onto silicon wafers, creating the chips that are heavily demanded by AI applications. The company is also the only supplier of EUV systems, used to produced the most advanced, high tech chips on the market. 

These $180 million systems are operated by leading chip manufacturers like TSMC, Samsung and Intel for the production of their high end chips. As a result of working with these high profile clients, ASML is considered one of the leaders in the semiconductor industry. However, its growth has still been cyclical; following upgrade cycles of its clients. With a Trump presidency, it would be harder for ASML to export its DUV and EUV systems to China. 

Should you invest?

The rapid growth of the AI market is pressuring chip makers to add addtional features to their chips. Estimates suggests that that global demand for semiconductor equipment will increase by 3.4% in the following year. ASML will benefit from the acceleration of investment into semiconductor capital. 

As demand for AI chips expands from data centers to smartphones and computers, ASML will be in much better shape. The P/E ratio sits at 36.45 at the time of writing, making it a prime time for investors to have a look at investing in this stock.