Global Oil Prices Plunge, Chip Titans' Stocks Tumble

Preface

October 15th was a day that truly quickened the pulse of the U.S. stock market.

The third-quarter financial report released by the chip giant ASML was like a depth charge, detonating market concerns about the entire chip industry and the global economic outlook.

This Dutch lithography machine giant actually presented a report card in the financial statements that was far below market expectations, with the order amount being halved, and the performance expectations for 2025 were significantly reduced.

For a while, the market was in turmoil, and investors rushed to sell their chip stocks, trying to escape this sudden storm.

What is even more unsettling is that in the chip field, it is not only ASML's stock price that has plummeted, but the other two "giants," Intel and MDA, are also not immune.

At the same time, international oil prices also plummeted on this day.

So, what exactly is going on? What are the hidden reasons behind it?

Chip giant stock market plummet!ASML, a name that may be unfamiliar to the general public, holds a pivotal position in the field of chip manufacturing. ASML is the world's largest supplier of photolithography machines, with its equipment being crucial for chip production. Both its technology and market share are significantly ahead of the competition.

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Because of this, ASML's performance is often seen as an important indicator of the global chip industry's health. However, the latest financial report has dampened the market's spirits considerably.

ASML's net order intake for the third quarter was only €2.63 billion, significantly lower than the market's expectation of €5.39 billion. What's more concerning is that ASML has substantially lowered its future expectations. They predict that the net sales for 2025 will be reduced from the previous range of €40 billion to €50 billion to a new range of €30 billion to €35 billion, and the gross margin will also drop from 55% to 60% to a new range of 51% to 53%.

This series of negative news has hit the market like a bombshell, plunging ASML's stock price into the abyss. On October 15th, ASML's stock price plummeted by more than 16%, marking the largest single-day drop since 1998.

Why has ASML's performance suddenly declined?Market analysis generally believes that the main reason lies in the slowdown of demand growth in the global chip industry. Over the past few years, due to factors such as the pandemic and geopolitical issues, the global chip supply chain has been very tight, and chip prices have also risen accordingly. Major chip manufacturers have increased investments to expand production to meet demand, which has also led to many orders for ASML. As the impact of the pandemic weakens and global economic growth slows down, sales of consumer electronics are not as hot as before, and the chip industry has also begun to adjust its inventory. In addition, geopolitical factors have also had a negative impact on the chip industry. The United States' chip export control measures against China have made it difficult for Chinese companies to obtain high-end chip manufacturing equipment, which has also indirectly affected ASML's orders. Faced with market concerns about the prospects of the chip industry, some analysts believe that ASML's performance decline is only a short-term phenomenon, and in the long run, chip demand will continue to grow. They mentioned that with the rapid development of new fields such as artificial intelligence, 5G, and automotive electronics, chip demand will continue to grow. However, there are also analysts who express a more cautious view. They feel that the slowdown in global economic growth and the increase in geopolitical risks will bring long-term pressure to the chip industry.In the coming years, the chip industry is likely to go through a period of tough adjustment.

Chip stocks plunged collectively, can tech stocks still "sleep soundly"?

ASML's "bombshell" is like a stone thrown into a calm lake, causing huge waves throughout the chip industry and even the tech stock sector.

On October 15th, ASML's poor performance led to a decline in US chip stocks, staging a collective plunge.

Nvidia's stock price fell by more than 6%, the largest intraday decline since September 6th; AMD's stock price also fell by more than 5%; Broadcom, KLA, and Applied Materials, and other major chip companies also couldn't escape, with stock prices falling by more than 3%.

Looking at the performance of US tech stocks that day, the market sentiment was obviously pessimistic.

In addition to the heavy blow to chip stocks, the stock prices of other tech giants also fell to varying degrees.

Among them, Amazon and Meta's stock prices fell by more than 1%; Microsoft and Google's parent company Alphabet's stock prices also fell slightly.

It is worth noting that in the midst of the tech stock market's doom and gloom, Apple has become one of the few bright spots of the day.

This is the world's most valuable technology company, not only did its stock price not fall, but it rose by 1.6%, and it also set a historical high during the trading day, with a market value that once exceeded $3.6 trillion.Apple's "standing alone" is inseparable from its strong brand appeal, continuous product innovation capabilities, and stable financial conditions.

However, this also reflects that in the current market environment, investors are more fond of technology giants with core competitiveness and stable profitability.

For the future trend of technology stocks, analysts have also given different views.

Some analysts believe that the downturn in the chip industry is only a short-term phenomenon and will not fundamentally affect the long-term trend of technology stocks.

However, some analysts have expressed a more cautious view.

They believe that factors such as the slowdown in global economic growth, rising interest rates, and the intensification of geopolitical risks will all put pressure on technology stocks.

In the future, the volatility of technology stocks may increase, and investors need to be alert to the risk of pullbacks.

At the same time, there is another piece of news, the international oil price has also experienced a significant decline.

When will the "endless fall" of international oil prices and the "fog" of geopolitics disperse?

Just as investors are worried about the prospects of the chip industry, the international oil price has also joined the ranks of the "endless fall," adding a chill to the already turbulent market.On October 15th, international oil prices continued to decline, with the drop at one point exceeding 5% during trading.

Among them, the Brent crude oil futures price once fell below $73 per barrel, eventually closing at $74.25 per barrel, with a decrease of 4.14%; the WTI crude oil futures price closed at $70.58 per barrel, with a decrease of 4.40%.

As for this wave of oil price decline, market analysis believes that there are two main reasons. First, geopolitical risks have eased to some extent, and second, the growth of global oil demand has slowed down.

Previously, the intensification of the Israeli-Palestinian conflict and the tense situation in the Middle East led to concerns about the impact on oil supply, causing oil prices to rise continuously.

However, as Israeli Prime Minister Netanyahu stated that Israel would target Iran's military facilities rather than oil facilities, market concerns about a full-scale conflict in the Middle East have eased, and oil prices have also fallen accordingly.

On the other hand, the latest monthly report from the International Energy Agency (IEA) also poured cold water on oil prices.

The IEA adjusted its global oil demand growth forecast for 2024, from the original 900,000 barrels per day to 860,000 barrels per day.

The IEA pointed out that factors such as slowing global economic growth, high inflation, and energy transition will suppress the growth of oil demand.

However, although the IEA lowered its oil demand growth forecast for 2024, it raised its forecast for 2025, expecting an increase of 1 million barrels per day.

This indicates that the IEA still maintains a cautious optimistic attitude towards future oil demand.The three major U.S. stock indices "march lower" together, with market risk aversion heating up

Under the dual impact of a sharp decline in chip stocks and a significant drop in international oil prices, the three major U.S. stock indices also found it difficult to remain unscathed, and on October 15th, they "marched lower" together, with market risk aversion clearly intensifying.

On that day, the Dow Jones Industrial Average fell by 324.80 points, closing at 33,740.42 points, a decrease of 0.95%.

The S&P 500 index fell by 45.41 points, closing at 4,304.81 points, a decrease of 1.05%; the Nasdaq Composite index fell by 156.63 points, closing at 13,335.78 points, a decrease of 1.16%.

In addition to the poor performance of chip and energy stocks, other sectors also generally declined.

Some analysts believe that the main reason for the sharp decline in the U.S. stock market that day was the intensification of investors' concerns about the global economic growth outlook.

ASML's performance "bombshell" intensified market concerns about the global chip industry falling into a recession; the significant drop in international oil prices intensified market concerns about a slowdown in global economic growth.

The direction of the Federal Reserve's monetary policy also made the market feel uncertain.

Federal Reserve Governor Christopher Waller said on the same day that the Fed's future rate cuts may not be as large as in September, and this statement was interpreted by the market as a hawkish signal, triggering investors' concerns that the Fed may continue to raise interest rates.

Faced with the current turbulent market environment, investors have flocked to "cash is king," selling risky assets and seeking shelter.Conclusion

ASML's performance "bombshell" has triggered a collective plunge in chip stocks and affected the entire technology stock sector; the sharp drop in international oil prices reflects market concerns about the global economic growth outlook; the "joint decline" of the three major U.S. stock indexes indicates that market risk aversion is heating up.

Many market conditions now appear quite challenging, with a lot of uncertainty.

Investors should remain calm and rational, not blindly follow the trend, and should formulate appropriate strategies based on their own risk tolerance and investment objectives.

Observing market changes from the sidelines and investing cautiously is a wise choice.