European Chip Stocks Fall After U.S. Semiconductor Selloff Spreads Globally

TLDR

• European semiconductor stocks fell sharply Friday, with some names dropping over 10%
• The selloff followed steep losses in U.S. chip stocks Thursday, with the Philadelphia Semiconductor Index falling 4.3%
• TSMC reported a 77% jump in quarterly profit but its U.S. shares still fell 2.3%
• The pan-European STOXX 600 dropped 0.6%, with Europe’s tech sector shedding 2.3%
• Middle East tensions added pressure, with Burberry citing conflict as a drag on tourist spending

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European semiconductor stocks fell sharply on Friday, following a heavy selloff in U.S. chip names the night before. The losses were widespread across both continents.

Dutch chip-equipment maker ASML dropped around 6%. ASM International fell a similar amount. BE Semiconductor dropped 6.3%, Soitec lost 7.1%, Aixtron shed 7.4%, STMicroelectronics declined 7.6%, Siltronic dropped 7.2%, and AMS-Osram was down around 10%.

ASML Holding N.V., ASML

In the U.S., the Philadelphia SE Semiconductor Index fell 4.3% on Thursday. Memory-chip makers were hit hardest. SanDisk, Western Digital, Seagate Technology, and Intel all fell between 5.8% and 12.6%.

The Nasdaq 100 ended Thursday down 1.6%, and the S&P 500 fell 0.5%. Chip stocks were a major drag on both indexes.

The selloff came even as broader U.S. economic data came in upbeat and second-quarter earnings season got off to a strong start.

TSMC’s Strong Results Failed to Calm Investors

Taiwan Semiconductor Manufacturing reported a 77% jump in quarterly profit, one of the strongest results in the industry this earnings cycle. The numbers beat expectations by a wide margin.

Despite that, TSMC’s U.S.-listed shares still fell 2.3% on Thursday. That showed how high investor expectations have become for chip stocks, which have surged nearly 70% so far this year.

Strong forecasts from ASML also did little to stop the selling. Investors appeared to be pulling back from a sector that had run hard this year, regardless of earnings results.

Geopolitical Tensions Added to the Pressure

The selloff in chip stocks was not the only headwind. Rising Middle East tensions added to investor concern across global markets on Friday.

Iran said it launched fresh attacks on U.S. facilities in the Gulf. That pushed oil prices to a one-month high and raised fears about inflation reigniting.

Burberry fell 4.5% after the luxury group said the Middle East conflict was weighing on tourist spending in Europe. That hurt the luxury sector, which had been one of the better performers recently.

The pan-European STOXX 600 index was down 0.6% by mid-morning in Europe. The index is on track for a small weekly decline, extending its two-week loss to around 2%.

Utilities stocks rose 1.3%, as investors moved into more defensive parts of the market. Analysts noted the rotation trade was being threatened by rising yields and borrowing costs.

Sweden’s Saab rose 5.5% after reporting stronger-than-expected second-quarter operating profit. Norwegian recycling firm Tomra Systems jumped 14.7% on upbeat results. Volvo Group rose 0.5% after posting a 35% jump in second-quarter profit.

The European Central Bank is widely expected to hold interest rates unchanged at its July 23 meeting, though markets still price in a second rate hike in September.