July 25 (Reuters) - Shares in European semiconductor

firms less exposed to AI chips slumped on Thursday as falling

demand from their key automotive and industrial clients hit

business prospects, on top of a wider sector correction.

Chip component suppliers like ASML and ASM

International are more exposed to the booming AI chip

market and demand from high-end tech clients like Nvidia ( NVDA )

, TSMC, and Intel ( INTC ).

"The more high-end applications, linked to AI, those are

doing much better," said ING analyst Marc Hesselink.

But even they aren't immune to a "correction" in stock

valuations after strong rallies this year, coupled with worries

around the impact of trade spats involving China, the U.S. and

Europe, Hesselink added.

Shares in both ASML and ASMI were down about 3% in early

afternoon trading.

Companies with less AI exposure meanwhile were hit harder by

industrial clients and automakers cutting orders. Demand for

electric vehicles has slowed sharply in Europe.

STMicroelectronics, which supplies Tesla, tumbled

14% after it cut 2024 sales and margin targets for a second time

this year, as orders from industrial customers did not improve

and automotive demand fell.

Germany's Infineon, a top automotive chip

supplier, fell 6%.

Dutch company NXP Semiconductors ( NXPI ) earlier this week

reported its worst decline in quarterly revenue in four years on

weak demand from automotive customers, dragging down some U.S

peers with auto exposure.

And while German chip materials supplier Siltronic

raised its guidance, that was mostly due to the AI

market which it said would grow this year.

BE Semiconductor Industries slumped 13% after

forecasting flat third-quarter sales, hit by weak growth in

mainstream assembly markets, particularly in China, even as

orders for its systems used in AI grew.

Europe's STOXX 600 Technology index was down 2.8%,

largely dragged by semiconductor stocks including ams OSRAM

that fell 7% ahead of results on Friday, STMicro peer

Melexis falling 4%, and Technoprobe, Soitec

and Nordic Semiconductor ( NDCVF ) also down.

The sector's fundamentals remain strong, Hesselink said.

Companies still hope that EV demand will be robust in the longer

term.

Chip components related to EVs, particularly silicon

carbide, will be a growth driver in the second half of the year,

STMicro's CEO Jean-Marc Chery said in a conference call.