The chips were down with the Biden administration getting tough and Republican presidential candidate Donald Trump talking tough. Global chip stocks fell sharply, with ASML, Nvidia and TSMC posting declines amid reports of tighter US export restrictions and Trump’s comments fuelling geopolitical tensions.
ASML’s Netherlands-listed shares were down 11%, while Tokyo Electron shares in Japan closed nearly 7.5% lower. Arm, AMD, Marvell, Qualcomm and Broadcom were down more than 5% as of 11:50 a.m. Eastern Time (ET) on Wednesday (July 17). Nvidia was 8. 40% down on Nasdaq at 2.57 pm ET on Nasdaq.
Clamping down on companies exporting to China
The shares dropped after Bloomberg reported on Wednesday that the Biden administration was considering clamping down on companies exporting critical chipmaking equipment to China.
Washington’s foreign direct product rule (FDPR) allows the U.S. to impose controls on foreign-made products if they use the slightest bit of American technology. This can affect non-U.S. companies.
ASML’s stock dropped even though it reported earnings that beat market expectations for the second quarter. However, 49% of its sales were in China, revealing how much it stands to lose in the event of tighter restrictions. ASML makes the machines needed to manufacture the most advanced chips in the world.
Trump’s comments
Trump’s comments also weighed down semiconductor stocks.
He said Taiwan should pay the U.S. for defence in an interview with Bloomberg Businessweek published on Tuesday (July 16). He also claimed Taiwan took “about 100%” of America’s semiconductor business.
His remarks have raised doubts about the U.S. commitment to defend Taiwan if he becomes president and the island is attacked by China, which claims it as part of its territory.
The Taiwan-listed shares of Taiwan Semiconductor Manufacturing Co. closed down 2.4% on Wednesday.
The geopolitical tensions also dragged down chip stocks in the U.S. The VanEck Semiconductor ETF was down over 5% as of 11 a.m. ET. Super Micro Computer and Applied Materials stocks were also hit.