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Major chip player nosedives after publishing mistake

Trust me, the “Publish” and “Schedule” buttons are too close together. ASML, the world’s top supplier of semiconductor equipment, accidentally published its rather disappointing earnings a day early, sending its share price into a downward spiral.

Unfortunately, the rest of the industry decided to follow. ASML’s drop triggered a mass sell-off of semiconductor stocks, resulting in a combined market value loss of over $420 billion in Asian and US markets.

Crucial Chipmaker

The Dutch company is an essential link in the supply chain for semiconductors. In fact, ASML is the sole manufacturer and service provider of a specialized chipmaking machine:

• The chip giant exclusively makes the ultraviolet lithography (EUV) machine, which is considered one of the most intricate pieces of tech in history.

  • Each device costs over $200 million.

• Additionally, ASML manufactures a deep ultraviolet lithography (DUV) machine, which was the leading standard until it made the EUV machine.

  • It is still used today, though only two other companies in the world can do so.

Considering how essential ASML is to powering our everyday electronics—from cars and smartphones to AI programs—and the present AI boom, investors thought its earnings this quarter would be sunshine and roses. That was not the case.

False Start

In its earnings release, ASML stated that last quarter's equipment bookings fell short of their projections by over half. After the (accidental) announcement on Tuesday, the chip giant’s shares dropped 16%.

• The drop marked ASML’s biggest single-day drop since 1988.

• The plunge in share price led ASML to lose almost $53 billion in market cap on Tuesday alone.

Expectedly, the plunge triggered a chain reaction across the industry:

• After hitting a record high, Nvidia's stock dropped more than 4%, AMD's dropped 5%, and Arm's dropped about 7%.

• With 32 holdings overall, the iShares Semiconductor ETF also saw a 5% decline.

ASML attributed some of the problem to US and Dutch shipment restrictions to China. The company stated in an earnings report earlier this year that sales in China generated 49% of its revenue. But, as restrictions pile, ASML predicts that the share will drop to barely 20% in 2025.

Mounting penalties: President Biden announced (on the same day) that the US is considering implementing further restrictions by capping the number of semiconductors that can be shipped off from US chip makers to other countries, due to national security reasons.

Technology

The Department of Justice has had enough of Google

This would be the worst breakup since JLo and Ben Affleck. Last week, the Department of Justice said it’s considering asking a federal judge to force Google to sell off sections of its business, in what would be an unprecedented breakup of one of the world’s biggest companies.

This comes just two months after Google got into legal trouble when a federal judge ruled that Google used unlawful monopoly practices to maintain its top search engine ranking.

If Google is forced to sell…

It would be a big deal. Google would have to sell off its other businesses, including Google Chrome and Android, if District Judge Amit Mehta (who sided with the DOJ in the last trial), determines that a split of the tech giant is required.

However, legal pundits are skeptical that a breakup would come to fruition. Daniel Ives, a director at Wedbush Securities, told Bloomberg that the outcome “is unlikely at this point” but the tech giant will have its hands tied to the courtroom fighting the case for a while.

If a breakup is unlikely, what is more probable?

Judge Mehta will probably choose to select one of the many options suggested by the DOJ, which are:

• Forcing Google to give rivals access to its search engine data, particularly if it is utilized for AI-assisted search capabilities.

• Requiring Google to terminate its exclusive contracts with cell phone providers that make it the default browser.

• Restricting Google's access to other websites for AI training, which would severely weaken its competitive advantage.

The ruling must be decided by Mehta by the end of summer next year, but Google will almost certainly appeal, making for a very long and arduous legal battle for the world’s number one search engine provider.

Google basically won three Nobel Prizes

How about some positive news for Google? As Google deals with another antitrust battle, three Google-affiliated researchers were awarded the Nobel Prize for their work on artificial intelligence, solidifying Google's position as a clear leader in the field.

Google Geniuses

John Jumper and Demis Hassabis, two of the three chemists who took home the prize, are researchers at Google's DeepMind AI lab. Additionally, Geoffrey Hinton, a team member awarded the Nobel Prize in Physics, served as a vice president at Google until 2023.

• Hassabis and Jumper were recognized for their efforts to use AI to decipher proteins, while Hinton was honored for his research on neural networks, the building blocks of AI technology.

As Big Tech increasingly works its way into the AI industry, it’s established its position as a harbinger of innovation. Hinton said in a press conference that “Big Tech is not oriented toward the next Deep-Learning breakthrough… very much of it is unscientific.”

Breakthrough Business

AI is becoming a more crucial industry (the Nobel Prize Committee seems to agree) and as the commercial sector starts to get recognized for its development of the tech, it could mark a change in how scientific research is conducted.

• Exceptionally large amounts of information and computational power were needed for the study conducted at DeepMind.

  • One of the few businesses in the world that could finance the initiative and provide the data is Google.

As we just talked about in the previous section, Google is also under scrutiny from the DOJ regarding antitrust violations. If a breakup occurs, it would not only affect the world’s number one search engine provider, but one of the predominant powers in AI research and development.

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Grab Bag

US sends cutting-edge defense system to Israel

Here’s the latest development between Israel and the US. The Pentagon announced earlier this week that it will deploy 100 troops and an advanced anti-missile system to Israel in response to Iranian missile threats. 

The Pentagon announced on Sunday that it will send the Terminal High-Altitude Area Defense (THAAD) system to Israel, along with American troops to operate it, to help fend off a potential Iranian ballistic missile attack.

President Biden made the statement as he chastised Israel for its recent attacks on the UN peacekeeping force in Lebanon, which were widely denounced by the 40 nations who support the mission.

Latest Developments

The deployment follows Iran's fire of almost 200 missiles into Israel earlier this month in retribution for the killings of Hezbollah and Hamas officials, to which Israel has stated it intends to retaliate.

In another incident early this week, Israel is under fire after over a dozen UN soldiers were hurt in southern Lebanon.

• According to the UN, Israeli tanks overran a UN base and shells later exploded, releasing smoke that made several peacekeepers sick.

• Israel claims that its forces retreated into the base to remove injured soldiers after Hezbollah fired antitank missiles at its positions close to the station.

Most recently: Yesterday, Israel said that Hamas leader, Yahya Sinwar, was killed in Gaza. Israel claims that Sinwar was the mastermind behind the Oct. 7th attacks that killed ~1,200 people. US officials have taken the opportunity to renew ceasefire talks and secure the release of the remaining hostages.

For updates on the regional conflict in the Middle East, click here.

Why you’re getting fewer fries in your fast-food

Food inflation seems to be an ever-expanding issue, and now it’s going after our fries. A major french fry provider of McDonalds has closed one of its processing plants and cut 4% of its workforce due to a decline in demand.

Lamb Weston, the biggest dry producer in North America, said it was closing the doors on one of its factories and firing nearly 400 people. It generates nearly 14% of its sales from McDonalds.

Fry-less Future

As fast-food and restaurant prices increasingly dissuade customers from eating out, more people are opting to go to the store and make fries themselves, which has led Lamb Weston to suffer.

• According to the fry producer, over 80% of the fries eaten in the US are from fast-food restaurants.

• CEO Tom Werner said promotional deals (referencing McDonald’s $5 meal deal) had customers “trading down from a medium fry to a small fry” which has hurt sales.

  • While the increase in traffic is welcome, customers trading down still “acts as a partial headwind” for the company.

However, McDonald’s has bigger fish to fry: The fast food chain is suing the biggest meat processors in the world, Tyson, Cargill, JBS, and National Beef Packing, for allegedly colluding to increase prices for almost ten years.

Fast Facts

Alien Alert: NASA launched the $5.2 billion Europa Clipper mission to Jupiter on Monday; the mission will make dozens of flybys to search for organic molecules and other elements necessary for life by 2031. TLDR: NASA is looking for aliens.

Sad Story: Two kids lost their lives over the weekend while at haunted hayrides in Minnesota and Tennessee.

Intern Income: Trading firm Jane Street Capital posted an opening for a quantitative research internship with a base salary of $250,000. They listed research experience as "a plus", and no background in finance is required.

Redbox Revival: Seen a Redbox lately? The WSJ reports that there are still around 24,000 of the outdated, underused movie rental vending machines in the country.

Baratheon Bidding: Hundreds of props from the legendary HBO series Game of Thrones were actioned off this week, with the total spend reaching $3.1 million. The Iron Throne alone went for $1.5 million.