Shares of chipmakers like Nvidia (NVDA), Taiwan Semiconductor Manufacturing (TSM) and ASML (ASML) have soared this year as investors bet on the AI boom. But on Wednesday, the momentum stalled.
All three stocks fell for reasons ranging from investor concerns about export restrictions to a broader move away from technology stocks.
One headwind that emerged was the possibility of tighter restrictions on exports. semiconductor technology To China.
Bloomberg News Agency reported that The Biden administration is considering tougher restrictions that include controls on foreign-made products that use even minimal U.S. technology.
The current restrictions have already impacted the ability of US-based companies to sell to China. Sales to China As a percentage of total data center revenue, it decreased from 19% in FY23 to 14% in FY24.
ASML shares were the biggest losers on Wednesday, falling more than 12%. The Netherlands-based chip equipment maker’s shares also came under pressure after its third-quarter guidance.
While ASML beat its second-quarter earnings and revenue expectations, its revenue forecast for the current quarter came in below analysts’ consensus estimates.
The company also said it expects quarterly gross margin in the 50% to 51% range versus Wall Street expectations of 51.1%.
Former President Donald Trump’s statement that Taiwan “should pay” the United States for protection against any aggression from China also contributed to a decline in shares of chip companies.
“As you know, we’re no different than an insurance company,” Trump said in an interview with Bloomberg Businessweek published Tuesday. “Taiwan doesn’t give us anything.”
He also added that Taiwan has captured “about 100 percent” of the chip business in the United States.
Trump’s comments sent shares of chipmaker TSMC down more than 7% on Wednesday.
Many chipmakers, including Nvidia, rely on Taiwan for manufacturing. The island nation east of China is a major semiconductor hub, home to about 92% of the world’s most advanced chipmaking capacity. According to To the US International Trade Commission.
It is worth noting that shares of semiconductor companies Intel (INTC) and GlobalFoundries (GFS) rose during the session. Both companies are seen as beneficiaries of the Biden administration’s efforts to produce chips within the United States.
The near-fatal sell-off comes as investors have recently shifted from large-cap stocks to small-cap stocks.
Technology began to turn around last week after the latest inflation data gave investors more optimism that the Federal Reserve will start cutting interest rates in September.
The Russell 2000 (^RUT) has outperformed the large-cap Nasdaq 100 (^NDX) for five straight sessions.
The small-cap index fell about 1% on Wednesday, while the technology-dominated Nasdaq 100 fell about 3%.
Ines Ferry is a senior business reporter at Yahoo Finance. You can follow her on X on @ines_ferre.
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