Shares of global chipmakers, including Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC), dropped on Wednesday as investors reacted to potential new export controls from the Biden administration and comments on Taiwan by former President Donald Trump.
The market impact was immediate. As of Wednesday morning, the stock performances were as follows:
ASML’s shares in the Netherlands fell by 7.7%.
Tokyo Electron’s shares in Japan closed down nearly 7.5%.
TSMC’s Taiwan-listed stock was down 2.4% at market close.
Nvidia’s shares were 4% lower in Nasdaq pre-market trading.
Arm’s stock dropped 4.86% before market open.
Applied Materials’ shares dipped 5.24% in the pre-market.
The downturn came after reports on Tuesday night by Bloomberg indicated that the Biden administration is considering stringent trade restrictions. These restrictions would apply if companies like Tokyo Electron and ASML Holding continue to supply China with advanced semiconductor technology. The proposed foreign direct product rule (FDPR) would significantly curb the sharing of American technology with China, affecting both U.S. and non-U.S. firms.
Just hours earlier, former President Donald Trump stated in an interview with Bloomberg Businessweek that he believes Taiwan should compensate the U.S. for its defense efforts. He argued that Taiwan has taken nearly all of America’s semiconductor business. TSMC, based in Hsinchu, Taiwan, is the world’s largest chipmaker, producing an estimated 90% of the world’s most advanced chips that are used in everything from iPhones to artificial intelligence models.
Trump’s comments come at a time when Taiwan’s essential role in the global chip industry raises questions about U.S. defense commitments amid increasing military activity by China.
“If China were to invade, it would shut down production and create an economic crisis,” stated House Foreign Affairs Committee Chairman Michael McCaul, who led a bipartisan delegation to Taiwan in May.