Semiconductor Stocks Slide Despite ASML and TSMC Earnings Beats

Strong results did not lift chip stocks

In early October, analysts liked three chip stocks ahead of earnings: ASML, TSMC and Lam Research. All three carried Strong Buy consensus ratings. A TipRanks screen put ASML's implied upside at about 32%, TSMC's at about 19% and Lam's at about 17%. ASML reported on October 14, TSMC on October 15 and Lam on October 21.11 The thesis was simple: these companies sit at different points in the chip supply chain, so their results would show whether AI spending still had momentum.11

The answer was mixed. The companies mostly delivered, but the stocks did not follow. As November begins, chip stocks are no longer driven only by AI demand. They also have to absorb high oil prices, a Federal Reserve that leans toward raising rates, Treasury yields near 5% and a crypto market under heavy pressure. Together, those forces have made a winning chip pick much harder to turn into a winning trade.

ASML's record quarter met a cool response

ASML posted record third-quarter net sales of €11.7 billion and net income of €5.0 billion. It also narrowed its full-year 2026 sales outlook to between €44 billion and €45 billion.42 Gross margin reached 57.5%, above the company's guided range of 55% to 57%. Fourth-quarter guidance points to sales of €14.2 billion to €15.2 billion.4442 EUV shipments rose to 40 systems from 16 in the prior quarter, a sign that customers are ramping production at advanced nodes.45

Reports differ on how large the beat was. One account put earnings per share 20.8% above forecast while revenue beat by only 0.4%.46 Another measured the GAAP figure against a lower consensus and arrived at a 35.8% beat. That figure includes a one-time gain on equity investments.48 ASML said roughly €0.5 billion of net income came from a higher valuation of its stake in Mistral AI.46 The more careful reading is that the quarter was strong, but part of the profit surprise came from that accounting gain. Investors seem to have reached the same conclusion. ASML shares fell about 3.7% over the reaction window, worse than the S&P 500.48 One analysis tied the drop partly to ASML's decision to hold off on further capacity expansion until after fiscal 2027.43

TSMC also beat, earning $4.60 per ADR against a $4.46 estimate. CEO C.C. Wei said he saw no sign of an AI slowdown, and the company expects N2 capacity to more than double in 2027.19 Lam Research's results did not appear in the coverage reviewed for this article, so no conclusion is drawn about the third name.

A sector sell-off came first

The stocks were already weak before results arrived. Goldman Sachs noted in early October that the Philadelphia Semiconductor Index had fallen 11% over two months while the S&P 500 rose 4%. The bank called this a de-risking that made the setup more constructive.17 Goldman named Applied Materials, Seagate and Microchip as tactical buys. It flagged Qualcomm, KLA and Western Digital as names with near-term downside risk.17 It singled out Qualcomm as possibly ahead of itself because of high expectations around agentic AI.14

By mid-October, writers were already recommending chips as buys on the dip. One piece argued that Nvidia was trading at about 13.5 times fiscal 2028 earnings.18 The TipRanks list also changed between editions. ASML's implied upside rose from about 32% to nearly 39%, and Lam's from about 17% to 25%.1116 That reflects falling share prices, not higher price targets.

The pullback deepened in the last week of October. Disappointing results from Amazon and Intel drove a tech-led sell-off that left the major indexes down for the week.21 Intel fell 28.58% on Friday, and the Nasdaq-100 tracking ETF (QQQ) dropped 3.47% in one session.29 Amazon became the third hyperscaler, after Alphabet and Meta, to report negative free cash flow. That raised concern about how much debt is funding AI infrastructure.21 In this view, the risk to chipmakers is less about demand for their products and more about whether their biggest customers can keep paying for AI buildouts.

Next week tests AMD and Qualcomm

The next round comes quickly. ON Semiconductor reports on November 2, AMD on November 3 and Qualcomm and Arm on November 4.23 AMD has guided to roughly $13 billion in third-quarter revenue, up from $11.5 billion in the second quarter.26 Commentators expect guidance to matter more than results for the quarter just ended, given how investors treated Intel.22

Earnings are not the only event. The midterm elections fall on November 3, and the October jobs report comes on November 6.22 FactSet data cited by CNBC still projects about 30% earnings growth for the S&P 500 in the third quarter. However, the average earnings beat is only 1.4%, well below the five-year average of 7.5%, largely because of Meta and Alphabet.21 BTIG's Jonathan Krinsky expects the S&P 500 to test its 200-day moving average near 7,306, which would be a decline of more than 5%.21

Rates add pressure on chip valuations

Monetary policy is another headwind. The Fed raised rates in September for the first time since 2023.30 It then held at 3.75% to 4.00% this week, with two officials dissenting in favor of a hike.29 Markets price roughly an 80% chance of a hike in December.22 The 10-year Treasury yield has been hovering around 5%, partly because of concern about how much borrowing is funding AI data centers.28 This matters most for high-multiple chip stocks. A strong jobs report could raise rate expectations further and pressure those stocks even if company results hold up.22

Oil adds inflation risk

Oil prices feed directly into the rate outlook. Brent crude was trading above $115 a barrel in late October and was on track for an October gain of about 10% or more. The main driver was the possibility of renewed US strikes on Iran after the November 3 midterms.3 Brent was heading for its fourth straight monthly gain, and WTI was up about 14% for the month.8 A claimed Houthi missile strike on Saudi Arabia's Ras Tanura refinery added to fears of supply disruption.9

Forecasts diverge widely. J.P. Morgan's model puts Brent's fair value at $94, about $20 below where it trades. The bank attributes most of the gap to geopolitical risk.2 BMI expects Brent to average $107 in the fourth quarter and $112 in the first quarter of 2027. It then expects a steep drop once Hormuz reopens.2 Goldman's escalation scenario points to $120, while UBS sees about $110 at year-end.8 The futures curve is in steep backwardation, meaning traders expect prices to stay high near term and ease over the next several years.6 For equity investors, the direct effect is inflation, which supports the case for a December hike.322

Bitcoin falls with risk assets

Crypto has offered no hedge. Bitcoin traded near $77,000 on October 31, about 39% below its October 2025 record of roughly $126,000. About $427 million in leveraged positions were liquidated, and US spot Bitcoin ETFs saw $643 million in outflows.31 A security breach at Binance triggered forced selling. Estimates of its size vary. TRM Labs traced about 18,270 BTC, worth $1.47 billion, while one outlet's headline used a much larger $6.3 billion figure.35 Bitcoin is down about 8% over the month.36 Coverage noted that the slide came alongside the tech sell-off.38 That pattern suggests investors treat Bitcoin as another risk asset.

Analysis: choose by catalyst

The main lesson from October is that a good earnings report is no longer enough for chip stocks. ASML beat and still fell.48 TSMC beat and remained a buy-the-dip candidate rather than a market leader.1920 Goldman's approach, which favors stocks with specific near-term catalysts over broad exposure to the sector, has held up better than blanket bullishness.17

The main risks for chip stocks now are rising yields, oil prices tied to the Iran conflict and doubts about hyperscaler cash flow. AMD and Qualcomm will not settle those questions. Their guidance will show, though, whether the weakness after Intel's report reflects one company's problems or a broader repricing of AI spending.