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AI enthusiasm remains high, but macro uncertainty could be rising in the semiconductor space
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As earnings season chugs along, we profile NXP Semiconductor, CSX, and ASML Holding
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Analyst Days on the docket could shed new light on economic risks and some potential tailwinds heading into 2025
We have a treat for you this week: We’re going to skip right past the election.
Looking ahead to the post-November 5th world, three Analyst Days caught our team’s attention. NXP Semiconductor (NXPI), CSX (CSX), and ASML Holding (ASML) each hold events that may shed light on key cyclical areas of the global economy.
There’s heightened uncertainty right now, and not just regarding who will be the 47th POTUS. Global demand for semiconductors appears robust - Jensen Huang even used the word “insane” to describe what’s going on at NVIDIA1 - but that may indeed be due to the secular artificial intelligence story. Other more traditional use areas of chips could be seeing a slowdown. Elsewhere, there are few measures seen more as a macro bellwether than rail freight carload trends.
No matter who resides in the White House three months from now, they might inherit a decent economy by most gauges, though some metrics may be losing steam on the margin, along with soft sentiment among households. GDP growth has been solid throughout the year, and the third quarter could print above 3% on a seasonally adjusted annualized basis.2 As with so many indicators, however, there’s nuance here. While the services sector is on the mend the manufacturing sector has its struggles, at least according to the latest set of PMI numbers published by the Institute for Supply Management and S&P Global.3
But we are now more than three weeks into Q4. Investors and portfolio managers must look ahead to what the macro picture will be. Upcoming Analyst Days may offer such clues.
November 7: NXP Semiconductor
Shares of the $59 billion market cap tech stock have trodden water for much of 2024 after an intra-year pop and drop. NXPI hit a high just below $300 after notching a bear-market low below $140 24 months ago. Perhaps the biggest highlight was actually a lowlight this past July. NXP issued a generally disappointing Q2 report; non-GAAP EPS of $3.20 nearly hit the street’s expectation of $3.21, but the stock fell 7.6% in the session that followed, according to data from Option Research & Technology Services (ORATS).4
Despite broad tailwinds in the semiconductor industry, NXP’s second-quarter revenue was down 5% on a year-over-year basis. CEO Kurt Sievers noted that the company navigated a cyclical trough in the industry and that sequential growth is forecast to resume.5
Europe’s biggest technology company ASML plunged following the early release of its Q3 report on October 15. Disappointing bookings figures drove home the point that the semis space can go through significant macro-related swings.6 For NXP, its earnings report confirmed for Monday, November 4 AMC will be closely watched. ORATS reports a consensus EPS forecast of $3.43.7 It then hosts NXP Semiconductors N.V. Investor Day 2024 the following Thursday.
November 7: CSX Corp.
We’ll get back to the chips theme in a minute, but let’s jump the tracks to CSX. The Jacksonville-based Industrials-sector stock is likewise off its YTD high, perhaps pressured by about-flat rail traffic compared with this time a year ago.8 It reported disappointing Q3 results on October 16, but the release came after an impressive rally off its October lows.9
Transports as a group have caught a bid lately; Dow Theory would suggest that the development means good things for the overall stock market. The Dow Jones Transportation Index poked to a 52-week high last week on the heels of positive earnings reaction to many airline stocks.10 The onus remains on transports bulls to lift the index above its all-time high notched in 2021’s fourth quarter.
We will see how that plays out in the final two-plus months of 2024. Following a weak response to its third quarter report, investors will likely keep an eye on CSX’s November 7 Investor Day. It could be the final business update of the year based on our corporate event data deck.
Comments from its management team will be particularly interesting from the standpoint of the significant disruptions following the Southeast’s one-two tropical gut-punch from Hurricanes Helene and Milton.
November 14: ASML Holding NV
From the transport of goods via trains to the transport of data through semiconductors, ASML de-railed last week. It released Q3 results a day earlier than expected due to a “technical error.”11 Last quarter’s realized net bookings and the bleak 2025 sales outlook rattled the chip industry. ASML, the stock, fell more than 16% last Tuesday in response to the release, and the losses only mounted on Wednesday, though many of its peers snapped back.12
Geopolitical tensions and uncertainty about what the new year might bring were said to be the driver of the tepid forecast. Export restrictions on China were specifically cited on the earnings call by Roger Dassen, ASML’s CEO.13 It was a reminder that bullish AI sentiment may be long-lasting, but other global economic forces can still assert themselves. Chip companies caught a big bid last Thursday, though, after strong (perhaps reassuring) Q3 results and an upbeat outlook from Taiwan Semiconductor (TSM).14
Investors may get more details on ASML’s outlook at the company’s November 14 Investor Day event. Its management team is then slated to present at five conferences from November 18 through December 3.
The Bottom Line
It’s a common media refrain that uncertainty runs high ahead of US elections. That seems to be a reality when scanning trends among economically sensitive industries today. Investors should not only parse earnings reports in the next few weeks, but also pay close attention to insights at Analyst Days on tap.
1 Nvidia CEO Jensen Huang Says Demand for Its Chips Is ‘Insane', Investopedia, Kara Greenberg, https://www.investopedia.com
2 GDPNow, Federal Reserve Bank of Atlanta, October 18, 2024, https://www.atlantafed.org
3 United States Services PMI, Trading Economics, October 16, 2024, https://tradingeconomics.com
4 NXPI, ORATS, October 16, 2024, https://dashboard.orats.com
5 NXP Semiconductors Reports Second Quarter 2024 Results, NXP Semiconductors, July 22, 2024, https://media.nxp.com
6 ASML just gave us a first glimpse into how U.S. chip export curbs will dent its China sales, CNBC, Ryan Browne, October 16, 2024, https://www.cnbc.com
7 NXP, ORATS, October 16, 2024, https://dashboard.orats.com
8 AAR reports rail traffic for the week ending October 12, 2024. American Journal of Transportation, October 16, 2024, https://www.ajot.com
9 CSX Posts Higher Revenue, Profit as Freight Volume Grows, The Wall Street Journal, Connor Hart, October 16, 2024, https://www.wsj.com/
10 Dow Jones Transportation Average, CNBC, October 18, 2024, https://www.cnbc.com/
11 STATEMENT RELATING TO EARLY PUBLICATION OF OUR Q3 2024 RESULTS, ASML, October 15, 2024, https://www.asml.com
12 ASML just gave us a first glimpse into how U.S. chip export curbs will dent its China sales, CNBC, Ryan Browne, October 16, 2024, https://www.cnbc.com
13 ASML just gave us a first glimpse into how U.S. chip export curbs will dent its China sales, CNBC, Ryan Browne, October 16, 2024, https://www.cnbc.com
14 Nvidia and Apple supplier TSMC shares pop after quarterly profit soars on AI demand, CNBC, Ruxandra Iordache, October 17, 2024, https://www.cnbc.com
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