The $530 billion semiconductor industry is experiencing a growing divide: companies seizing the artificial intelligence wave are thriving, while those missing this opportunity are falling far behind. Based on the preliminary results of the Q3 earnings season in the US stock market, this divide may soon turn into a chasm.

"Without AI, the (chip) market will be very bleak," said Christophe Fouquet, CEO of Dutch chip manufacturing giant ASML, during a conference call last week.

ASML's Q3 orders were only half of the market's expectations. Due to weak demand in non-AI areas, the company has lowered its 2025 sales guidance. The disappointing performance caused ASML to plummet over 16% last week.

Moreover, ASML's earnings report has sparked a new round of concerns about the health of the chip industry. The Philadelphia Semiconductor Index plummeted last week, with the USA's largest chip equipment manufacturer, Applied Materials, dropping over 12%, while both KLA and Lam Research also plummeted.

Taiwan Semiconductor alleviated these concerns by raising its 2024 sales guidance. TSMC CEO C.C. Wei stated during a conference call last Friday that the AI demand is real, overall chip demand is stabilizing, and improving.

Although AI has sent out bullish signals, key markets such as personal computers and autos have not yet emerged from the winter. Gambelli Funds analyst Ryuta Makino predicts that the segmentation of the semiconductor industry will last at least until 2025.

We should expect this divergence to continue, as it is entirely possible to assume that AI is supporting all of this.

Has Intel and Samsung successively collapsed, with traditional semiconductor giants entering a "winter"?

Among the semiconductor stocks that have already reported earnings, besides ASML Holding, two other traditional semiconductor giants have fallen behind in AI competition:

Intel is cutting costs and delaying the construction of new factories to deal with the sales decline and increasing losses. After disappointing Q3 performance due to the delayed shipment of HBM3E high-bandwidth memory chips, Samsung issued a rare apology to investors.

This week, investors will closely watch Texas Instruments' earnings, with the company set to report earnings after market close on Tuesday in Eastern Time. Its analog chip products are widely used by a diverse customer base.

Overall, for semiconductor manufacturers, the road ahead is difficult, with many companies reaching record highs earlier this year. Some traders have started losing patience and selling stocks.

Compared to the aforementioned giants, "We are more cautious about other semiconductor equipment companies," wrote Cantor Fitzgerald analyst CJ Muse in a research note.

We once thought that long-standing players like asml holding would perform better. Obviously, this assumption was wrong.

Lam Research announced its financial report on October 23, KLA will announce on October 30, and Applied Materials will announce on November 14. Muse indicates that these stocks are expected to have more downside potential.

With massive ai capital expenditure, will nvidia and others have the last laugh?

As traditional giants like asml holding are under pressure, chip companies benefiting from the surge in ai spending have become the biggest winners.

According to media estimates, in the second quarter, microsoft, Alphabet, amazon, and meta platforms invested over $50 billion in capital expenditure, with most of it going to compute component manufacturers. Most of these giants have indicated plans to invest more funds in the coming quarters to expand ai infrastructure.

According to Solita Marcelli, Chief Investment Officer for UBS Group's wealth management in the americas, ai chip sales are expected to reach $168 billion this year and surge to $245 billion by 2025.

Marcelli wrote in a research note last week:

We remain bullish on the strong growth prospects of ai chips and will closely monitor management's guidance on future demand in the coming days and weeks.

Undoubtedly, the biggest winner in this AI wave is Nvidia, with its stock price hitting a new all-time high last week, soaring 175% since the beginning of the year and surpassing Apple at one point as the company with the highest global market cap.

Nvidia will release its new quarterly earnings report in November. Some believe that considering the expensive stock price and the high base from the same period last year, Nvidia's Q3 performance may 'face challenges'.

In the last quarterly report, Nvidia's revenue guidance for the third quarter is $32.5 billion, which falls in the middle of the expected range ($32 billion-$-33 billion), not reaching the highest expectations. This also signals a potential slowdown in performance growth.

Apart from financial data, some analysts have stated that investors will also closely monitor nvidia's AI investment scale and the latest news on the Blackwell chip.

It is worth noting that even some winners cannot escape the impact of a weak non-AI market, such as custom chip giant Broadcom, whose stock price plummeted last month after underperforming in non-AI business.