As global semiconductor stocks plunge on Wednesday after chip equipment maker ASML posted disappointing sales forecasts, investors are being urged to “see the nuance” by financial advisory giant deVere Group.
The message from CEO Nigel Green comes after markets were rocked when the Dutch chip company said it expects net sales for 2025 to come in between 30 billion euros and 35 billion euros, which is the lower half of the range it had previously estimated.
The news drove down global stocks in the now critical sector, and left markets around the world reeling.
The deVere Group CEO explains: “While we expect a short-term dip in demand for chips for devices such as smartphones, we do not anticipate a significant slowdown in demand for chips for the burgeoning AI sector.
“We urge investors to see the nuance in order not to miss out on potential returns.”
The smartphone market, once a powerhouse of growth and innovation, is showing signs of strain. Analysts predict a contraction in unit sales due to several interrelated factors.
“In mature economies, smartphones have reached saturation levels, with many consumers opting to retain their existing devices longer. This shift is a result of a combination of high-quality products that exceed prior expectations, diminishing incentives for upgrades, and rising consumer awareness regarding sustainability practices,” says Nigel Green.
In stark contrast to the challenges facing the smartphone sector, the AI chip market is experiencing an explosion in demand.
The deVere CEO continues: “As industries worldwide increasingly adopt AI, the need for specialized semiconductors capable of powering these advanced applications is surging.
“The convergence of data-driven decision-making, automation, and machine learning is creating a fertile ground for growth in the AI sector.
“Companies like Nvidia are spearheading this transformation by investing heavily in R&D for AI-specific solutions. Their commitment to pushing the boundaries of tech places them at the forefront of the AI revolution. And, as cloud computing continues to grow, the demand for powerful chips capable of managing complex tasks remotely will only increase.”
For investors, the current landscape presents both challenges and opportunities.
The expected decline in smartphone demand could lead to volatility in the stocks of traditional semiconductor manufacturers.
Investors should proceed with caution and consider diversifying their portfolios to mitigate potential risks associated with this downturn.
On the other hand, the burgeoning AI chip market offers a compelling narrative for growth. Companies focused on AI solutions are likely to benefit from robust demand, bolstered by substantial investment flows into the sector.
Investors should consider exploring stocks tied to AI and machine learning, as these technologies are poised to transform industries fundamentally.
Firms specializing in AI processors, data analytics, and cloud computing solutions are well-positioned to capitalize on the anticipated growth.
Also, geopolitical factors - such as discussions around export restrictions on advanced AI chips - could introduce additional volatility.
As policymakers tackle national security concerns, companies that can adeptly face these regulatory challenges while maintaining a strong innovation pipeline will be better equipped for long-term success.
“The semiconductor sector is rapidly evolving, and this is creating market jitters, but amidst this turbulence lies a wealth of opportunity for those ready to embrace the future of technology,” concludes Nigel Green.
