On June 4, 2024, the semiconductor industry witnessed a significant downturn as Dutch-based semiconductor equipment manufacturer ASML reported a disappointing sales forecast, causing a ripple effect across global chip stocks. This news sent shockwaves through the market, with shares of ASML plunging 5% during the European trading session, following a 16% drop the previous day. This single-day decline resulted in a staggering loss of €49.2 billion ($53.6 billion) from its market value.

The ASML's stock nosedive did not occur in isolation; it dragged other European semiconductor companies into the red zone. ASMI, a Netherlands-based supplier of wafer processing equipment, saw its shares dip by 2.3%. BE Semiconductor, another Dutch chip equipment manufacturer, experienced a 1.9% decline. STMicroelectronics, a Dutch-listed semiconductor company, lost 1.2%, while German chipmaker Infineon's shares fell by 1.1%. Soitec, a French manufacturer of semiconductor materials, also saw a 0.9% decrease in its stock value.

In Asia, the situation was equally grim. Tokyo Electron, a Japanese semiconductor manufacturing firm, recorded the most significant losses with a nearly 10% drop. Renesas Electronics fell over 3%, and Advantest, a supplier of testing equipment, dipped by 0.8%. Taiwan Semiconductor Manufacturing Company and Hon Hai Precision Industry, internationally recognized as Foxconn, saw their shares fall by 3.3% and 1.6%, respectively. South Korean chip giant SK Hynix, known for manufacturing high bandwidth memory chips for AI applications for Nvidia, traded 1.6% lower. Samsung Electronics, the world's largest producer of dynamic random-access memory chips, also saw its shares decline by 1.9%.

The losses in the semiconductor sector did not go unnoticed by the broader market indices. Japan's Nikkei 225 index fell by more than 2%, South Korea's Kospi index dipped by 0.6%, and Taiwan's Weighted Index slid by 0.7%.

ASML's report on June 4th indicated that the company anticipates net sales for 2025 to range between €30 billion and €35 billion ($32.7 billion and $38.1 billion), which is at the lower end of the previously projected range. The net bookings for the September quarter were €2.6 billion ($2.83 billion), significantly below the consensus estimate of €5.6 billion. However, net sales exceeded expectations, amounting to €7.5 billion.

The CEO of ASML cautioned about the cautious behavior of customers and noted that the recovery is proceeding more gradually than initially anticipated. Following ASML's stock plummet, other global chipmakers also saw a sharp decline. Nvidia's shares fell by 4.7%, and AMD's shares lost 5.2%. Adding to the investor sentiment, Bloomberg reported on Tuesday that U.S. officials had discussed limiting the sales of advanced AI chips from Nvidia to certain countries for national security reasons, further dampening the market's mood towards the semiconductor sector.

ASML has been facing a challenging business environment in China due to export restrictions imposed by the U.S. and Dutch governments on its shipments. The company's CFO, Roger Dassen, stated on Tuesday that he expects ASML's business in China to show a "more normalized percentage" in their order book and overall business. He projected that China would account for around 20% of the company's total revenue for the next year, down from 49% in the June-quarter earnings presentation.

Eugene Hsiao, head of China equity strategy at Macquarie Capital, commented on "Squawk Box Asia" on Wednesday, suggesting that while it is economically sensible for ASML to continue its operations in China, there are broader geopolitical issues that are impacting economic relations.

The global semiconductor industry is at a crossroads, with companies like ASML grappling with the effects of geopolitical tensions, export restrictions, and cautious customer behavior. The industry's future will likely be shaped by how these companies navigate these challenges and adapt to the changing global landscape.