European chip firms face challenges, even harder for those with less AI exposure

Shares in European semiconductor firms fell on Thursday as demand from automotive and industrial clients dropped, contributing to a broader sector downturn. While companies like ASML and ASM International benefit from the booming AI chip market and high-end tech clients, they are not entirely immune to stock valuation corrections and trade tensions involving China, the US, and Europe. Shares in both firms declined by about 3%.

Chipmakers with less AI exposure were hit harder. STMicroelectronics, a supplier for Tesla, saw a 14% drop after cutting sales and margin targets for the second time this year. Germany’s Infineon, a major automotive chip supplier, fell by 6%. NXP Semiconductors reported its worst revenue decline in four years due to weak automotive demand, negatively impacting US peers with similar exposures.

Despite the challenges, some companies still see growth prospects. Siltronic raised its guidance due to the AI market, which is expected to grow this year. However, BE Semiconductor Industries experienced a 13% slump after forecasting flat third-quarter sales, impacted by weak growth in mainstream assembly markets, particularly in China, even as AI-related orders increased.

The broader European semiconductor sector, represented by the STOXX 600 Technology index, was down 2.8%, dragged by various firms including ams OSRAM, Melexis, Technoprobe, Soitec, and Nordic Semiconductor. Despite current struggles, industry fundamentals remain strong, with companies hopeful that electric vehicle demand will recover, particularly for silicon carbide components.