Key Points
ASML posted record third-quarter sales of €11.7 billion and a record 57.5% gross margin, and said customers are already asking to place orders for 2029 and even 2030.
The company said the 30% capacity increases it planned for 2027 and 2028 won't meet demand. Its U.S. shares still fell 3.9% to $1,650.00.
September consumer prices rose 3.7% from a year ago, above the 3.6% forecast. Gasoline jumped 9.1% in the month alone.
Traders' odds of an October 28 Fed rate hike jumped to 53.7% from 22.1% a day earlier. The Nasdaq fell 1.9% and the 10-year yield closed at about 5.19%.
Bank of America sank 4.8% after a $1.2 billion federal penalty and a trading miss, and CoreWeave plunged 15.5% as yields on its bonds hit about 15%.
The company that makes the most important machines in the AI economy just said it can't make them fast enough.
ASML builds the extreme ultraviolet lithography systems that print the finest circuits on the most advanced chips. Every leading-edge AI processor depends on them. And on Wednesday, CEO Christophe Fouquet told investors that the 30% capacity increase ASML planned for 2027, and the 30% after that in 2028, still won't be enough.
Customers are lining up for 2028. Some want to place orders for 2029. A few are asking about 2030.
The stock fell 3.9% to $1,650.00.
That's what happens when a record quarter runs into a hot inflation report.
A Quarter With No Soft Spots
ASML's net sales hit a record €11.7 billion, near the top of its guidance. Net income came in at €5.0 billion. Gross margin reached 57.5%, above what the company had guided, helped by €3.3 billion of upgrade and service sales.
The outlook was stronger still. ASML expects fourth-quarter sales of €14.2 billion to €15.2 billion, and full-year sales of €44 billion to €45 billion, up about 36% from 2025. It expects to ship about 65 low-NA EUV systems this year, nearly 50% more than the 44 it shipped last year.
Memory is the surprise. ASML expects memory system sales to grow about 75% this year as chipmakers add EUV to advanced DRAM. And CFO Roger Dassen said prices go up starting in 2027, with the full effect showing up in 2028.
Remember, this came just days after the memory trade was crushed. A Chinese chipmaker, CXMT, claimed a breakthrough in next-generation DRAM, and Seoul's memory giants took the hit. SK hynix and Samsung are down sharply since Monday. ASML's answer: its memory customers are still buying.
Why the Stock Didn't Celebrate
Part of it was the quarter itself. Sales of €11.7 billion landed a hair below the €11.72 billion analysts expected, according to LSEG. ASML's shares rose about 2% in Europe on the news. But the U.S. shares couldn't hold up once the rest of the chip sector started falling. The PHLX Semiconductor Index fell 4.3% on Wednesday as investors sold off AI-related stocks.
Then 8:30 a.m. arrived.
The Inflation Number Wall Street Feared
Consumer prices rose 0.6% in September, the biggest monthly gain in five months. The annual rate climbed to 3.7% from 3.4% in August, above the 3.6% economists expected.
Gasoline did most of the damage. The gas index rose 9.1% in September alone, accounting for more than half of the monthly increase. Gas prices are up 34% over the past year, and airfares are up 22%. Diesel has soared about 70% since the Iran war began, even after Washington licensed Russian diesel to fight fuel prices.
The bigger problem is core inflation, which strips out food and energy. It rose 0.3% for the month, above the 0.2% forecast, and 2.6% from a year ago.
Bond traders moved fast. The 10-year Treasury yield jumped after the report, then gave it back to end near 5.19%. Odds of a quarter-point hike at the Fed's October 28 meeting jumped to 53.7% from 22.1% a day earlier, according to CME's FedWatch tool. Traders now see more than a 95% chance of at least one hike by year-end.
Stocks didn't recover. The S&P 500 fell 1.1% to about 7,720, the Nasdaq dropped 1.9% to about 26,693, and the Dow slipped 0.1% to about 51,622. The VIX, Wall Street's fear gauge, rose 10% to 16.84.
Bank of America Takes the Biggest Hit
Bank of America had the worst day among the big banks. Profit fell 17% to $6.93 billion, or 91 cents a share, after a $1.2 billion Treasury penalty for failing to report more than $5 billion in suspicious transactions. Without the fine, it earned $1.08 a share, still short of the $1.10 expected. Revenue of $30.12 billion missed by about $570 million, as bond trading fell 17%.
The stock fell 4.8% to $51.39. Morgan Stanley beat on the top and bottom lines, powered by a 41% jump in equities trading revenue to $5.8 billion, and still fell 2.7% to $181.61. It was a replay of the beat-and-fall pattern that hit Goldman Sachs on Tuesday.
The AI Debt Warning
The scariest move came from CoreWeave. The AI cloud company plunged 15.5% to $65.78 after yields on its unsecured bonds due 2032 touched about 15%, a level that signals bondholders are worried about how it pays for its chips. Elon Musk replied to a chart of the bond yields with one word: "Yikes."
The selling spread across AI infrastructure. Nebius fell 10.1%, and Lumentum dropped 9.3%.
What Lands Next
Taiwan Semiconductor reports Thursday morning. TSMC has already disclosed record quarterly revenue of about NT$1.49 trillion, up roughly 50% from a year ago. The questions are margins, the fourth-quarter outlook and its $60 billion to $64 billion spending plan, which flows straight to ASML.
PNC, U.S. Bancorp, Charles Schwab and Interactive Brokers also report Thursday, and Travelers and Truist follow Friday.
ASML says demand will outrun supply for at least two more years. The Fed may raise rates in two weeks. Investors are about to find out which one matters more.
This article is for informational and educational purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
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