What Happened?
Shares of computer processor maker AMD (NASDAQ: AMD) fell 7.6% in the pre-market session after chip tool maker ASML posted weak bookings (a key demand indicator) which fell below Wall Street's expectations, noting that tariffs had made the industry's outlook more uncertain.
The semiconductor industry's intricate supply chain means that ASML's performance has cascading effects on other players. Investors treat ASML's outlook as a proxy for demand in the industry, and if ASML's orders are down, it suggests chip producers are delaying capacity expansion.
ASML's CEO, Christophe Fouquet, called out "customer cautiousness" and a "more gradual" recovery in areas outside of AI. Such caution among customers can imply reduced demand by affecting their short-term revenues and stock valuations.
Separately, Nvidia announced it might be unable to sell some high-end chips (including the H20 chips) to China due to new export controls and requirements from the Trump administration.
As a result, the company planned to take a $5.5 billion charge due to inventory writedowns and canceled sales. This announcement raised the possibility that other semiconductor manufacturers might face similar risks.
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What The Market Is Telling Us
AMD’s shares are very volatile and have had 21 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 12 days ago when the stock dropped 8.4% on the news that China imposed a 34% tariff on all U.S. imports amid escalating trade war tensions. This was especially rough for the US chipmakers because a big chunk of their business leans on demand out of China. The new tariffs not only threaten to erode profit margins but also risk reducing market share.
Adding to the uncertainty, the Trump administration signaled the possibility of further regulatory action against the sector. Although semiconductor firms were notably excluded from the broad tariffs unveiled on April 2, 2025, their exclusion raised concerns that targeted restrictions could still be forthcoming.
AMD is down 26.2% since the beginning of the year, and at $89.07 per share, it is trading 51.6% below its 52-week high of $183.96 from July 2024. Investors who bought $1,000 worth of AMD’s shares 5 years ago would now be looking at an investment worth $1,563.
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