Global chip stocks took a significant hit recently, with major players like Nvidia, ASML, and TSMC experiencing sharp declines. This downturn was triggered by reports of potential tighter export restrictions from the U.S. and escalating geopolitical tensions, notably fueled by comments from former U.S. President Donald Trump.
ASML’s shares, listed in the Netherlands, dropped by 10% during morning trade, while Tokyo Electron’s shares in Japan closed nearly 7.5% lower. Other semiconductor companies such as Arm, AMD, Marvell, Qualcomm, and Broadcom saw declines exceeding 5% as of 10:28 a.m. ET.
This market reaction followed a Bloomberg report indicating that the Biden administration might implement a wide-ranging rule aimed at restricting the export of critical chipmaking equipment to China. The U.S. Foreign Direct Product Rule (FDPR) allows the imposition of controls on foreign-made products that incorporate any amount of American technology, potentially impacting non-U.S. companies.
In response to these developments, CNBC reached out to the U.S. State Department, the Bureau of Industry and Security, and the Office of the U.S. Trade Representative for comments on the report.
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Despite ASML reporting earnings that exceeded market expectations for the second quarter, its stock suffered due to the significant portion of its sales (49%) occurring in China, highlighting the company’s vulnerability to potential restrictions. ASML is renowned for producing machines essential for manufacturing advanced chips.
Adding to the negative sentiment were comments from Donald Trump, who suggested in a Bloomberg Businessweek interview that Taiwan should compensate the U.S. for defense efforts and claimed that Taiwan had taken nearly 100% of America’s semiconductor business. These remarks raised concerns about the U.S.’s commitment to defending Taiwan if Trump were to be re-elected, especially given China’s claim over the island.
In Taiwan, shares of Taiwan Semiconductor Manufacturing Co. (TSMC) closed down by 2.4% following the comments and geopolitical developments.
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In the U.S., the geopolitical tensions had a broad impact on chip stocks, with the VanEck Semiconductor ETF down about 5% as of 10:24 a.m. ET. Companies like Super Micro Computer and Applied Materials were also among the significant decliners in trading.
1. Impact on Major Chipmakers
The report of potential U.S. export restrictions caused a significant drop in stock prices for major chipmakers like ASML, Nvidia, and TSMC.
2. Biden Administration’s Consideration of Export Rules
The Biden administration is contemplating a rule that could severely restrict the export of critical chipmaking equipment to China, impacting global chip stocks.
3. ASML’s Earnings Overshadowed by China Sales
Despite reporting better-than-expected earnings, ASML’s significant sales exposure to China led to a sharp decline in its stock price.
4. Trump’s Comments Add to Market Uncertainty
Comments from Donald Trump about Taiwan’s defense payments and the semiconductor industry added to the geopolitical tensions affecting chip stocks.
5. Broader Market Impact
The geopolitical and regulatory developments weighed on chip stocks globally, with significant declines seen across various major semiconductor companies.
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