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Semiconductor stocks fell on Wednesday after former US President Donald Trump said Taiwan should pay for its own defense and the US was reportedly considering tighter restrictions on chip trade with China.
The tech-heavy Nasdaq Composite index fell 2.8 percent in New York, marking its worst day since December 2022. The S&P 500 was down 1.4 percent, ending a three-session winning streak.
“Investors have become accustomed to non-stop good news from tech stocks, so the slightest bit of negativity caught people by surprise and sent markets into a panic,” said Dan Coatsworth, investment analyst at AJ Bell.
Chip stocks led the decline, with Nvidia off 6.6 percent and AMD down 10.2 percent. In Europe, ASML had its worst day since 2020, down 11 percent, following a Bloomberg report that the Biden administration was considering tougher trade restrictions on sales in China by companies that include a Dutch semiconductor maker.
The attack wiped $496 billion from the market value of shares in the Philadelphia Semiconductor Index, which includes Nvidia, TSMC and Intel.
Adding to concerns about the sector, which has driven much of the U.S. stock market’s gains this year, Joe Biden’s presidential rival Trump told Bloomberg that Taiwan, which is central to the global chip industry, should pay for its own defense.
Shares in the US-listed company alongside Taiwan Semiconductor Manufacturing Co fell 8 percent.
“Polo stocks are getting it from both sides of the political aisle,” said Steve Sosnick, chief market strategist at Interactive Brokers.
“If the rotation from high-performing tech turns into a bigger rush in megacap stocks, that drives the bus [leading the market rally]then investors really have nowhere to hide,” he added.
Ajay Rajadhyaksha, global head of research at Barclays, said the moves reflected investors’ increased focus on political risk, much higher odds over the past three weeks that Trump would win the US election and the continuation of “very aggressive rotational trading”. large companies and towards smaller companies.
“Over the last year and a half, you’ve had this incredible shift in technology,” he said, “so it’s people who are profiting from the news.”
In contrast to sharp declines in stocks with large Asian exposures, chip stocks with larger U.S. manufacturing capacity posted strong gains. GlobalFoundries shares jumped nearly 7 percent. Intel briefly rose as much as 8 percent to hit a three-month high, but pared most of the gains in the end.
“There has already been a massive sector rotation in the past week — for example, anything Trump-oriented, like industries that fit into the ‘make America great’ narrative, has rallied. This just adds to it,” said Ted Mortonson, technical strategist at Baird.
Excitement around artificial intelligence has caused huge share price gains for companies such as Microsoft and Nvidia this year. But in recent weeks, some analysts and investors have begun to express concern about how soon Big Tech will recoup the tens of billions of dollars it’s investing in AI infrastructure.
Christophe Fouquet, chief executive of the Netherlands’ ASML, a leading supplier of high-end chip-making equipment, said on Wednesday he was confident the chip industry would recover next year, thanks in particular to artificial intelligence, but admitted there was “a lot of uncertainty” surrounding it. its pace and shape.
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