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The speed bump in the AI-chip trade, in one chart

The market seems to have gotten over Tuesday’s news of a sharp slowdown in orders for the most sophisticated chipmaking machines on earth.

Matt Phillips

10/16/24 11:25AM

Global semiconductor shares are rebounding a bit on Wednesday, a day after ASML, the Dutch chip-equipment-maker at the heart of the semiconductor boom, tanked giants like Nvidia and Broadcom.

If you want to know why investors hit the brakes on the AI-chip trade yesterday, look no further than this chart:

As part of ugly earnings results released Tuesday, ASML said the value of the new orders it booked in Q3 halved from Q2 levels, down to €2.6 billion ($2.74 billion), far below analysts’ expectations of roughly €4.1 billion.

The miss raised questions about the durability of demand for chip equipment, and by extension, whether the market’s AI-fueled bullishness over chip stocks may have gone way beyond what’s justified by fundamentals.

High-flying chip shares, many of which have been key drivers of this year’s stock market rally, tumbled in response: Nvidia dropped more than 4%, Broadcom fell more than 3%, Applied Materials slid more than 10%, and Arm Holding fell nearly 7%.

But so far Wednesday morning, they’ve recovered some of those gains (see VanEck Semiconductor ETF rising), with the emerging consensus being that ASML’s orders reflect struggles in non-AI chipmaking, rather than in the area of the market folks are most excited about.

Another related explanation centers on the fact that Chinese buyers may have pulled forward orders to try to get ahead of any additional trade tensions that could emerge throughout the US election season.

So after a brief wobble, the chip-stock rally seems to be back on track — though the scale of the miss from ASML should highlight the risk that stock-market enthusiasm could be getting slightly ahead of business realities.

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American Airlines joins the flock, hiking bag fees amid higher jet fuel prices

American Airlines on Thursday announced that it, too, will be hiking the fees it charges customers to check luggage.

With the move, all four of the major US airlines, which together control about 80% of the US market, have now hiked their baggage fees in recent days amid surging jet fuel prices.

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

Since late March, JetBlue, Delta Air Lines, United Airlines, Canada’s WestJet, and Southwest have hiked their fees. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.

American Airlines updates bag fees and Basic Economy fares

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

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Less than a year after implementing them, Southwest is also hiking its bag fees

Southwest Airlines has joined the growing list of airlines opting to hike their bag fees amid sustained higher jet fuel costs.

Starting today, the first checked bag at the carrier — which implemented bag fees less than a year ago — will jump from $35 to $45, and the second from $45 to $55. Southwest quietly disclosed the change Tuesday.

Southwest assigned the decision to “part of an ongoing analysis of the business and against the evolving global backdrop.”

As of Wednesday, jet fuel prices dropped to $4.16 a gallon, per the Argus US Jet Fuel Index, down from $4.81 on Tuesday following President Trump’s ceasefire announcement, which sent travel stocks soaring. Major airlines have shed some of those gains in premarket trading Thursday.

With the move to hike bag fees, Southwest joins JetBlue, United Airlines, Delta Air Lines, and Canada’s WestJet, all of which also boosted fees this month. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.