Tech Newsround – ASML, AMD & Global Foundries

ASML Q1 25: The tariff effect.

• ASML reported reasonable Q1 25 results, but its order book was way adrift of expectations, which I take as a sign of weakness in China and uncertainty around tariffs as opposed to a sign that the AI freight train is slowing down.
• Q1 25 revenues / EPS were E7.7bn / E6.00 broadly in line with expectations of E7.8bn / E5.74.
• Guidance also remained unchanged with Q2 25 revenues expected to be E7.2bn – E7.7bn (E7.45bn) and FY 2025 at E30bn – E35bn.
• However, the order book fell well short, coming in at E3.9bn compared to forecasts of E4.8bn.
• This caused some consternation, which combined with new restrictions hitting Nvidia (see here) and AMD (see below) triggered another correction in the semiconductor sector.
• ASML remained tight-lipped about China, even though its contribution to sales and orders is falling as Chinese customers become more concerned about the long-term viability of using ASML equipment.
• I expect this to continue as the Department of Commerce is showing every intention of further increasing restrictions on what can be exported to China.
• Tariff uncertainty has also been a contributing factor that has caused customers to delay orders, meaning that once there is visibility on how global trade is going to be conducted, this should quickly correct.
• ASML remains the sole supplier of equipment capable of manufacturing advanced chips for AI in the cloud and edge, and so it is being used as a gauge for AI demand.
• The weak order book looks to me to be more about China and tariff uncertainty than it is pointing to a sudden drop in AI demand, and so I do not expect that we will see related weakness in its customers and the customers of its customers.

AMD: Same game, same pain.

• AMD has said that it will take up to $800m in provisions as a precaution for the chips that it will now no longer be able to sell in China, which again indicates that the long-term effect of these restrictions will be economic rather than technological.
• The MI308 product that AMD has been selling in China now requires a license from the Department of Commerce, which, with a presumption of denial, effectively means that shipments will now cease and not resume.
• The stated intent of these restrictions is to prevent China from developing advanced AI that could be used for the purpose to damage US interests, which at a high level has already badly failed.
• This is because DeepSeek, Alibaba and others have already produced AI that competes with the leaders and are likely to continue to do so regardless of the restrictions that are placed upon China.
• However, the lack of advanced silicon will mean that Chinese AI costs more to produce and run, which will greatly undermine the proposition to use China’s AI outside of its borders.
• I have serious doubts whether the US Department of Commerce has thought this far ahead, and I expect that rendering China uncompetitive when it comes to other countries is going to be the main benefit of these restrictions when it comes to containing China’s rise.

Global Foundries – Bathwater Baby.

• With tariffs being all the rage, one baby that has been thrown out with the bathwater is Global Foundries, whose fabs, while not leading edge, are all situated far from China’s backyard with a hefty presence in the USA.
• Hence, the USA fabs in New York have suddenly become more attractive, and I suspect that there has been an upswell of inquiries about using Global Foundries to manufacture in the USA.
• This makes Global Foundries an interesting one to consider as a “tariff” trade, and given that it is now trading on 18.6x 2025 PER, it has also become much more attractive on a fundamental basis.
• I don’t own Global Foundries, but it increasingly looks like it is worth having a look.