Finance
Nvidia, ASML and TSMC stocks were hit hard – and here’s why
Chip stocks Nvidia (NVDA), Taiwan Semiconductor Manufacturing (TSM) and ASML (ASML) have all soared this year on investors’ bets on the artificial intelligence boom. On Wednesday, their momentum came to an abrupt halt.
The three stocks fell for reasons ranging from investor concerns over export restrictions to a broader rotation out of technology stocks.
One headwind that emerged was the potential for tighter restrictions on exports semiconductor technology to China.
Bloomberg reports this the Biden administration is considering introducing a stricter measure, including checks on foreign-made products that use even the smallest amount of American technology.
The current restrictions have already affected the ability of US companies to sell to China. Nvidia sales to China decreased as a percentage of total data center revenue from 19% in fiscal 2023 to 14% in fiscal 2024.
ASML shares suffered the strongest decline on Wednesday, with a drop of more than 12%. Shares of the Netherlands-based chip equipment maker were also under pressure following third-quarter expectations.
Although ASML exceeded expectations on both second-quarter revenue and results, current quarter revenue expectations fell short of analyst consensus estimates.
The company also said it expects quarterly gross margin between 50% and 51%, compared to Wall Street expectations of 51.1%.
Chip stocks were also dragged down by comments from former President Donald Trump, who said Taiwan “must pay” the US for protection against any aggression from China.
“You know, we’re no different than an insurance company. Taiwan gives us nothing,” Trump told Bloomberg Businessweek in an interview on Tuesday.
He also said Taiwan controls “about 100%” of the U.S. chip trade.
Trump’s comments sent shares of chip manufacturing and design giant TSMC plunging more than 7% on Wednesday.
Many chipmakers, including Nvidia, depend on Taiwan for their production. The island east of China is a major semiconductor hub with about 92% of the world’s most advanced chip manufacturing capacity. according to to the U.S. International Trade Commission.
It’s worth noting that shares of semiconductor companies Intel (INTC) and GlobalFoundries (GFS) rose during the session. Both companies are seen as beneficiaries of the Biden administration’s push for onshore chip manufacturing in the US.
The semi-sell-off comes as investors have recently switched from big-cap names to small-cap stocks.
The rotation-out technology began last week after the latest inflation data gave investors more optimism that the Federal Reserve would cut rates in September.
The Russell 2000 (^RUT) outperformed large-cap stocks on the Nasdaq 100 (^NDX) over a five-session period.
On Wednesday, the small-cap index fell about 1%, while the tech-heavy Nasdaq 100 fell nearly 3%.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X @ines_ferre.
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