US Markets
Wednesday, July 17th, 2024 3:45 pm EDT
Key Points
- Global chip stocks, including ASML, Nvidia, and TSMC, fell sharply due to reports of potential tighter U.S. export restrictions on critical chipmaking equipment to China and heightened geopolitical tensions from comments by former U.S. President Donald Trump.
- ASML’s stock dropped 11%, despite beating earnings expectations, because 49% of its sales are in China, highlighting the firm’s vulnerability to potential U.S. restrictions. Other major chip companies, such as Tokyo Electron, Arm, AMD, Marvell, Qualcomm, and Broadcom, also saw significant declines.
- Trump’s remarks, suggesting Taiwan should pay the U.S. for defense and claiming it took “about 100%” of America’s semiconductor business, increased doubts about U.S. commitment to defend Taiwan, further impacting semiconductor stocks. This led to additional declines in U.S.-listed chip companies and related ETFs.
Global chip stocks experienced significant declines, with major players such as ASML, Nvidia, and TSMC posting notable losses amid reports of potential tighter export restrictions from the U.S. and escalating geopolitical tensions. ASML’s shares in the Netherlands dropped 11%, and Tokyo Electron’s shares in Japan closed nearly 7.5% lower. Other chip companies like Arm, AMD, Marvell, Qualcomm, and Broadcom also saw their stocks fall by more than 5% as of 11 a.m. ET.
These declines followed a Bloomberg report indicating that the Biden administration is considering implementing broad rules to restrict companies from exporting critical chipmaking equipment to China. The U.S. foreign direct product rule (FDPR) allows the U.S. to control foreign-made products that incorporate even minimal American technology, potentially impacting non-U.S. companies.
ASML, despite reporting second-quarter earnings that exceeded market expectations, saw its stock plummet due to the high percentage (49%) of its sales being in China, emphasizing the significant risk posed by potential restrictions. ASML manufactures essential machines for producing advanced chips, making the company highly vulnerable to these regulatory changes.
Further exacerbating the negative sentiment in the semiconductor sector were comments from former U.S. President Donald Trump. In an interview with Bloomberg Businessweek, Trump suggested that Taiwan should compensate the U.S. for its defense and claimed that Taiwan had taken “about 100%” of America’s semiconductor business. These remarks raised concerns about the U.S. commitment to defend Taiwan in the event of an attack by China, which considers Taiwan a part of its territory.
Following Trump’s comments, Taiwan Semiconductor Manufacturing Co.’s shares, listed in Taiwan, closed down 2.4% on Wednesday. The heightened geopolitical tensions impacted U.S. chip stocks as well, with the VanEck Semiconductor ETF dropping about 5% as of 11 a.m. ET. Among the U.S.-listed companies affected were Super Micro Computer and Applied Materials.
In summary, the global chip sector faced substantial losses due to looming U.S. export restrictions and increased geopolitical tensions, further fueled by Trump’s provocative comments about Taiwan. This uncertainty underscores the sector’s vulnerability to regulatory and geopolitical developments, which continue to weigh heavily on investor sentiment and market performance.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/17/global-chip-stocks-from-nvidia-to-asml-fall-as-geopolitics-trump-weigh.html
