Chip stocks Nvidia (NVDA), Taiwan Semiconductor Manufacturing (TSM), and ASML (ASML) have ridden high this year, fueled by the AI boom. But on Wednesday, their winning streak hit a wall.
The trio saw significant declines, driven by concerns over export restrictions and a broader tech stock sell-off.
A major worry surfaced over potential tighter restrictions on semiconductor technology exports to China.
The Biden administration is reportedly considering stricter controls on foreign-made products using even minimal American tech.
Current restrictions have already dented US firms’ sales to China. Nvidia’s sales to China dropped from 19% of total data center revenue in fiscal year 2023 to 14% in 2024.
ASML, the Dutch chip equipment maker, suffered the steepest decline, plunging over 12%. Despite beating second-quarter expectations, its third-quarter revenue forecast fell short of analysts’ estimates.
The company also projected a quarterly gross margin of 50%-51%, missing Wall Street’s 51.1% expectation.
Adding fuel to the fire, former President Donald Trump commented that Taiwan “should pay” the US for protection against China.
“You know, we’re no different than an insurance company. Taiwan doesn’t give us anything,” Trump told Bloomberg Businessweek. He also claimed Taiwan took “about 100%” of the US chip business.
Trump’s remarks sent TSMC shares down more than 7%. Many chipmakers, including Nvidia, rely on Taiwan for manufacturing.
The island holds roughly 92% of the world’s advanced chipmaking capacity, according to the US International Trade Commission.
Interestingly, shares of Intel (INTC) and GlobalFoundries (GFS) rose. Both are seen as beneficiaries of the Biden administration’s push to bring chip production back to the US.
The chip sell-off aligns with a recent investor trend of rotating out of big-cap tech stocks into small-cap stocks.
This shift began last week after a positive inflation report boosted hopes for Federal Reserve rate cuts in September.
On Wednesday, the small-cap Russell 2000 (^RUT) fell about 1%, while the tech-heavy Nasdaq 100 (^NDX) dropped almost 3%.
In a market defined by swift shifts and high stakes, the semiconductor sector’s recent dip reminds us that even the most promising bets can face sudden headwinds.
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