The S&P 500 and Nasdaq Composite both closed at all-time highs on July 25. The major indexes continue to pull further and further away from their April lows as many mega-cap growth stocks rocket to new heights. However, not all tech stocks are riding the wave.
Texas Instruments (TXN 1.71%), commonly known as TI, and ASML Holding (ASML 4.62%) -- two semiconductor companies in the tech sector -- underwent significant sell-offs after their latest earnings reports. TI fell 13.9% from when it reported earnings on July 22 through July 25, while ASML is down 13.6% since reporting earnings on July 16.
Here's why TI and ASML have taken a hit and what it could mean for other artificial intelligence (AI) stocks.
Image source: Getty Images.
Warning bells of a near-term slowdown
TI reported solid results but guided for a slowdown in its upcoming third quarter. The guidance was enough to send the stock tumbling.
Similarly, ASML reported good results, but said that it could not confirm it will grow in 2026 due to macroeconomic and geopolitical uncertainty. However, ASML did reaffirm its 2030 targets, which (on the high end) guide for doubling revenue from 2024 levels and expanding gross margins from the low 50% range to 56% to 60%.
News that TI and ASML are expecting a near-term slowdown may spook investors. However, it's essential to understand how both companies fit into the broader AI narrative before overstating their impact on other AI stocks.
NASDAQ: TXN
Key Data Points
Not all aspects of the semiconductor industry are booming
If the semiconductor industry were a house, Texas Instruments would be the fasteners holding everything together with its analog and embedded semiconductors.
Analog semiconductors take analog information and convert it into electric signals -- like a microphone turning a sound wave into an electric audio signal. These semiconductors are in consumer electronics, like speakers, but they are also in cellular radios, satellite communication devices, measurement devices, the automotive industry, healthcare applications, and more.
Embedded semiconductors perform functions and connect electronic devices. TI makes hardware and software solutions for processing, wireless connectivity, sensing, motor control, cybersecurity, safety, and more. Growth markets for embedded semiconductors include industrial automation, the automotive industry (sensors, cameras, radar, etc.), and edge AI.
Edge AI involves running AI algorithms directly on a device, rather than in the cloud, and then transferring information to the device. For example, TI makes a number of solutions for factory automation that use AI microprocessors to improve efficiency, security, and enhance human-machine interaction.
NASDAQ: ASML
Key Data Points
TI may not provide the essential graphics processing units (GPUs) or central processing units (CPUs) that are used in data centers, but it does contribute key associated infrastructure in the form of power management solutions, converters, controllers, and connectivity solutions. Power solutions help data centers boost power conversion by reducing energy waste and managing heat.
Due to TI's exposure to numerous different end markets, the company's results can fluctuate in line with the broader economy. So, changes in the global supply chain, trade, and general economic growth can throw a wrench in its results. In fact, TI's growth has been negative over the last couple of years because demand boomed in 2022 and 2023 and has since slowed down. As you can see in the following chart, TI's stock price has gone practically nowhere for the last four years, and earnings are down significantly from their peak.
On the second-quarter 2025 earnings call, TI CEO Haviv Ilan said the following in response to an analyst question asking why TI is less optimistic about a cyclical recovery in the industry:
But I think all the situation of tariffs and geopolitics disrupting supply chains, I think that's not over. It's true that there is pause right now on the semiconductor tariffs, both in the U.S. and in China. But we have to be prepared for what the future may hold.
IIan also said that there have been signals of industrial recovery, but that automotive hasn't recovered. In general, management's tone shifted from being upbeat about the near-term prospects to being more cautious. And that shift, paired with the stock running up into the earnings print, was enough to trigger a steep sell-off.
ASML's global supply chain and customer base make it vulnerable to trade tensions
AMSL manufactures highly complex lithography machines used to produce semiconductor chips. Lithography is just one step in the semiconductor manufacturing process, but it is arguably the most crucial. ASML has a virtual monopoly on the latest technology in photolithography, called extreme ultraviolet (EUV). These machines are in high demand because they are essential for producing complex AI chips at scale.
So, while TI is a diversified company that sells a lot of different high-volume products to a variety of customers, ASML is a highly specialized company that depends on just a handful of customers (like Taiwan Semiconductor Manufacturing, Samsung Electronics, and Intel).
In its latest quarter, ASML sold 76 lithography systems for 5.541 billion euros in net bookings -- meaning each system sold for an average of $85.6 million. But the newer EUV systems can sell for $150 million to $400 million.
Even for a company the size of Taiwan Semi, it takes a lot of capital to buy a handful of these machines. The spending cycle will ultimately depend on the capital allocation plans and demand from key customers (like Apple, Nvidia, Broadcom, etc.).
While TI indicated that the cycle could take longer to recover than initially anticipated, ASML's warnings were more closely tied to near-term uncertainties related to trade tensions and the economy.
Despite being a Dutch company, and therefore not directly involved in U.S. trade policy, ASML is highly sensitive to trade tensions because the Netherlands (as a member of the EU and NATO) works closely with the U.S. on trade. ASML sources parts from around the world and sells the majority to its systems to customers in Asia. However, restrictions limit ASML from selling its most advanced systems to China.
Balanced buys for investors looking for value in the semiconductor industry
TI and ASML are similar in that they don't design or manufacture GPUs and CPUs, but rather, benefit from the overarching growth of AI and global connectivity. Despite their differences, both companies offered a useful reminder that the semiconductor industry is cyclical, and earnings can fluctuate for factors outside each company's control.
The degree to which TI and ASML's warnings impact other AI companies depends on the application. For example, TI's news could have ripple effects for companies like Analog Devices or NXPI Semiconductors. ASML's forecast may relate to other semiconductor equipment suppliers, such as Lam Research or Applied Materials. However, their forecasts don't directly impact chip designers, like Nvidia and Broadcom, or signal that demand for AI spending is slowing down (as evidenced by growing AI budgets from hyperscalers like Microsoft).
All told, TI and ASML remain solid investments in the semiconductor space, offering effective ways to capitalize on broader industry evolution. Both companies also pay growing dividends, especially TI, which features 21 consecutive years of dividend growth and has a 2.9% dividend yield.
