Earlier this week, news surrounding ASML Holding (ASML.US) triggered selling, followed by optimistic performance from Taiwan Semiconductor (TSM.US) driving chip stocks into a recovery mode. However, the weakness and volatility of tech stocks in October are not abnormal. On Thursday, the Nasdaq 100 index hit a historical high, with the widely followed iShares Semiconductor ETF (SOXX.US) rising by 2%. The world's largest chip manufacturer, Taiwan Semiconductor, surged by 12% after announcing third-quarter results and guidance exceeding expectations.

Earlier this week, concerns about global chip demand were raised following ASML's financial report, which pressured chip stocks. UBS Group pointed out that historically, October is the most volatile month for tech stocks. In a recent Chief Information Officer report, UBS stated that in the past 40 years, the monthly volatility of the Nasdaq 100 index in October has been 26%, compared to an average volatility of 22% in other months.

UBS stated, "In addition to upcoming corporate earnings releases, we expect geopolitical uncertainties to continue rising, as well as the risk of export restrictions exacerbating volatility."

On Tuesday, ASML's US-listed stock dropped by 16%, while other chip stocks including NVIDIA (NVDA.US), Broadcom (AVGO.US), and Intel (INTC.US) also saw significant declines. ASML's US-listed stock fell by nearly 22% over the two-day plunge and slightly dropped on Thursday.

On Tuesday, the Nasdaq 100 index fell by 1.4%, and the ASML Semiconductor ETF index dropped by 5.2% due to ASML revising down the lower end of its 2025 net sales guidance range to €30 billion to €35 billion. Additionally, the Dutch computer chip equipment supplier's third-quarter bookings were €2.6 billion, below expectations.

While ASML views AI as a key driver for industry recovery, ASML CEO Christophe Fouquet stated during the earnings conference call: "We believe the recovery pace in other areas is slower than expected."

UBS Group stated that it does not believe the 'weak start' of the technology sector will undermine the growth story of artificial intelligence. The bank stated: 'Despite investors' concerns about the sustainability of capital expenditures related to artificial intelligence, the investment plans of artificial intelligence supply chain companies indicate a more constructive outlook for the coming years, with some pointing to Taiwan Semiconductor's rapid expansion in advanced artificial intelligence packaging facilities.'

UBS Group stated: 'Without expressing opinions on any specific company, we continue to believe in the strong growth prospects of artificial intelligence semiconductors and closely monitor management's guidance on future demand.'

ASML Holding did indeed state this week that due to speculation surrounding export controls, the company holds a 'more cautious view' on sales in China. Media reports this week indicated that U.S. officials have been negotiating restrictions on the sale of advanced artificial intelligence chips from NVIDIA and other U.S. companies in certain countries.