Shares of chipmakers Nvidia (NVDA), Taiwan Semiconductor Manufacturing (TSM) and ASML (ASML) have all soared this year on investors’ bets on the artificial intelligence boom. On Wednesday, their momentum came to an abrupt halt.
All three stocks fell for reasons ranging from investor concern over export restrictions to a broader rotation out of technology stocks.
One of the obstacles that emerged was the possibility of tighter restrictions on exports of semiconductor technology in China.
Times Of Update reported The Biden administration is considering a tougher measure involving controls on foreign-made products that use even the smallest amount of American technology.
Current restrictions have already impacted the ability of U.S.-based companies to sell in China. sales to china decreased as a percentage of total data center revenue from 19% in fiscal 2023 to 14% in fiscal 2024.
ASML shares were the biggest decliners on Wednesday, falling more than 12%. Shares of the Dutch chip equipment maker were also under pressure after its third-quarter forecast.
While ASML beat its revenue and net income expectations in the second quarter, its revenue forecast for the current quarter is below analysts’ consensus estimate.
The company also said it expects quarterly gross margin to be between 50% and 51%, compared with Wall Street expectations of 51.1%.
Chip stocks were also dragged down by comments from former President Donald Trump, who said Taiwan “should pay” the United States for protection against any aggression from China.
“You know, we’re no different than an insurance company. Taiwan doesn’t give us anything,” Trump told Times Of Update Businessweek in an interview published Tuesday.
He also said Taiwan accounts for “about 100 percent” of the U.S. chip market.
Trump’s comments sent shares of chip manufacturing and design giant TSMC down more than 7% on Wednesday.
Many chipmakers, including Nvidia, rely on Taiwan for manufacturing. The island east of China is a major semiconductor hub with about 92% of the world’s most advanced chipmaking capacity. according to to the United States International Trade Commission.
It is worth noting that shares of semiconductor companies Intel (INTC) and GlobalFoundries (GFS) rose during the session. Both companies appear to be benefiting from the Biden administration’s push to produce chips in the United States.
The selloff in fixed income comes as investors have recently shifted away from large-cap stocks to small-cap stocks.
The technology rotation began last week after the latest inflation numbers gave investors more optimism that the Federal Reserve would begin cutting rates in September.
The Russell 2000 Index (^RUT) outperformed the large-cap Nasdaq 100 (^NDX) over a five-session stretch.
On Wednesday, the…
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