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AI chip giant Nvidia loses $158 billion in market value due to ASML's feeble forecast and US export restrictions

Semiconductor stocks in the United States and Asia fell sharply after ASML slashed its annual sales forecast due to weak demand for non-AI chips.

Meanwhile, reports emerged that the Biden administration is considering the possibility of capping US sales of advanced AI chips to certain countries.

Nvidia, the AI chips industry leader, lost 4.5% to sacrifice $158 billion of market capitalization. This is following Nvidia briefly becoming the world's most valuable company after overtaking Apple. Apple, with a market capitalization of $3.56 trillion, remains the world's most valuable company.

Other major semiconductor companies, like AMD, Intel, Arm, Broadcom, and Micron, also declined in the range of 3.2% to 5%. The Philadelphia SE Semiconductor Index was pulled down almost 5% by this general slide into the tech-heavy Nasdaq index.

ASML fell 16% after the Dutch chip-making equipment supplier to TSMC and Samsung inadvertently published its earnings report ahead of schedule. The company reported weak bookings and cut its sales forecast, saying that chip demand outside of AI continues to recover more slowly than expected. Logic chipmakers delayed orders, while memory chipmakers were planning only limited new capacity expansions.

Derren Nathan, head of equity research at Hargreaves Lansdown, commented on ASML’s unexpected earnings release, saying, “ASML’s fat finger error isn’t cause for concern in itself, but the content of the release didn’t make comforting reading for investors.”

Asian chipmakers, which include most of ASML's customers, have also decreased stock price. TSMC fell by 1.9%, while Samsung Electronics and SK Hynix dropped by 2.1% and 2.5% respectively. Last week, Samsung said that its profits in the third quarter would fall below expectation because it failed to take advantage of the surge in the number of AI chip demand. TSMC, the company expects to report a 40% increase in profit during the third quarter. The company counts Nvidia as one of its major clients.

Adding to the pressure, Bloomberg News reports that US officials are considering curbing export licenses of AI chips to countries in the Persian Gulf for national security reasons, fearing that those nations might pass on some sort of restricted technology to China.

“With the AI revolution expected to play such a huge part in upping productivity and enabling other technological advances, it’s not surprising the U.S. wants to do what it can to maintain its dominance,” said Danni Hewson, head of financial analysis at AJ Bell.