In its worst day since 2020, Wall Street's semiconductor index saw a loss of almost $500 billion in stock market value on Wednesday. The decline was attributed to a report indicating that the US was considering stricter restrictions on the sale of sophisticated semiconductor technology to China.
Chip stock sales increased following remarks made by Republican presidential candidate Donald Trump, who said that Taiwan, a major industrial hub, should reimburse the United States for its defence.
The newest concerns for chip investors stem from Washington's increasingly defensive posture in recent years towards the US semiconductor manufacturing sector, which it sees as strategically critical to competing with China.
As Bloomberg News reported on Tuesday, the US has informed allies that if businesses continue to provide China with access to cutting-edge semiconductor technology, it may use the strictest trade restrictions at its disposal.
Even though the report exceeded second-quarter profit projections, U.S.-listed shares of Dutch chipmaking equipment manufacturer ASML Holding (ASML.AS), opens new tab fell 13% after it was released.
Nvidia, a leader in AI, had an almost 7% decline in market value, or more than $200 billion.
Rival smaller companies AMD and Arm saw a 10% decline. Broadcom lost 8% while Micron, dropped 6%.
Businesses that manufacture chips in the United States benefited; GlobalFoundries increased by over 7%, and Intel had a 0.35 percent increase. Since Intel is developing multiple factories in the nation, some experts think the geopolitical tensions might work to their advantage.
"Market reactions are likely short-lived because the fundamental factors driving these markets haven't changed. Yes, U.S. restrictions on shipments to China will likely increase somewhat - regardless of the U.S. election outcome - but they've already been in place for a while," said Bob O'Donnell, chief analyst at TECHnalysis Research.
The government of President Joe Biden has taken strong action to prevent China from obtaining advanced semiconductor technology. In October, broad restrictions were implemented to block the export of AI processors made by companies like Nvidia.
The restrictions have hurt sales of American chipmakers in China. In the quarter that concluded on April 28, Nvidia's sales from China accounted for around 18% of its entire revenue, down from 66% during the same period last year.
In an attempt to reclaim the presidency on November 5, Trump stated to Bloomberg Businessweek that Taiwan ought to reimburse the US for its defence because the US provides nothing to Taiwan. The world's largest contract chip manufacturer, Taiwan's TSMC, saw its U.S.-listed shares drop 8% as a result.
Taiwan is a major player in the world's semiconductor supply chain. Experts have cautioned that any dispute over the island might destabilise the world economy.
The Philadelphia Semiconductor index fell 6.8%, marking the worst one-day drop since the COVID-19 epidemic crashed world markets.
Thanks to the AI boom, the index is still up 30% for 2024, outpacing the 17% increase of the S&P 500 index.
To regain the manufacturing advantage it lost to TSMC, Intel has been making significant investments. With $52.7 billion in subsidies, it is also among the top beneficiaries of the U.S. Chips Act, which was signed into law by Biden in August 2022.
Even if Trump wins reelection, policy analysts predicted that the United States will continue to prioritise semiconductors, possibly enacting further export restrictions to China and providing backing to homegrown chipmakers like Intel.
However, they expressed concern about Intel's potential to revive its manufacturing division, given that the foundry division of the corporation reported an operational loss of $2.47 billion for the quarter that concluded on March 30.
"It's likely President Trump would not only continue export restrictions, but strengthen them," said Michael Sobolik, a senior fellow at the American Foreign Policy Council. "He initiated many semiconductor export controls during his first administration, including the powerful 'foreign direct product rule' that limited foreign parties from enabling Huawei's access to semiconductors."
(Source:www.investing.com)
Chip stock sales increased following remarks made by Republican presidential candidate Donald Trump, who said that Taiwan, a major industrial hub, should reimburse the United States for its defence.
The newest concerns for chip investors stem from Washington's increasingly defensive posture in recent years towards the US semiconductor manufacturing sector, which it sees as strategically critical to competing with China.
As Bloomberg News reported on Tuesday, the US has informed allies that if businesses continue to provide China with access to cutting-edge semiconductor technology, it may use the strictest trade restrictions at its disposal.
Even though the report exceeded second-quarter profit projections, U.S.-listed shares of Dutch chipmaking equipment manufacturer ASML Holding (ASML.AS), opens new tab fell 13% after it was released.
Nvidia, a leader in AI, had an almost 7% decline in market value, or more than $200 billion.
Rival smaller companies AMD and Arm saw a 10% decline. Broadcom lost 8% while Micron, dropped 6%.
Businesses that manufacture chips in the United States benefited; GlobalFoundries increased by over 7%, and Intel had a 0.35 percent increase. Since Intel is developing multiple factories in the nation, some experts think the geopolitical tensions might work to their advantage.
"Market reactions are likely short-lived because the fundamental factors driving these markets haven't changed. Yes, U.S. restrictions on shipments to China will likely increase somewhat - regardless of the U.S. election outcome - but they've already been in place for a while," said Bob O'Donnell, chief analyst at TECHnalysis Research.
The government of President Joe Biden has taken strong action to prevent China from obtaining advanced semiconductor technology. In October, broad restrictions were implemented to block the export of AI processors made by companies like Nvidia.
The restrictions have hurt sales of American chipmakers in China. In the quarter that concluded on April 28, Nvidia's sales from China accounted for around 18% of its entire revenue, down from 66% during the same period last year.
In an attempt to reclaim the presidency on November 5, Trump stated to Bloomberg Businessweek that Taiwan ought to reimburse the US for its defence because the US provides nothing to Taiwan. The world's largest contract chip manufacturer, Taiwan's TSMC, saw its U.S.-listed shares drop 8% as a result.
Taiwan is a major player in the world's semiconductor supply chain. Experts have cautioned that any dispute over the island might destabilise the world economy.
The Philadelphia Semiconductor index fell 6.8%, marking the worst one-day drop since the COVID-19 epidemic crashed world markets.
Thanks to the AI boom, the index is still up 30% for 2024, outpacing the 17% increase of the S&P 500 index.
To regain the manufacturing advantage it lost to TSMC, Intel has been making significant investments. With $52.7 billion in subsidies, it is also among the top beneficiaries of the U.S. Chips Act, which was signed into law by Biden in August 2022.
Even if Trump wins reelection, policy analysts predicted that the United States will continue to prioritise semiconductors, possibly enacting further export restrictions to China and providing backing to homegrown chipmakers like Intel.
However, they expressed concern about Intel's potential to revive its manufacturing division, given that the foundry division of the corporation reported an operational loss of $2.47 billion for the quarter that concluded on March 30.
"It's likely President Trump would not only continue export restrictions, but strengthen them," said Michael Sobolik, a senior fellow at the American Foreign Policy Council. "He initiated many semiconductor export controls during his first administration, including the powerful 'foreign direct product rule' that limited foreign parties from enabling Huawei's access to semiconductors."
(Source:www.investing.com)
