Shares of several major global chipmakers, including Nvidia and Taiwan Semiconductor Manufacturing Company (TSMC), declined on Wednesday as investors reacted to potential new export controls from the Biden administration and recent remarks regarding Taiwan by former President Donald Trump.
The market impacts of these developments were significant. Here’s how the stocks of major chipmakers performed on Wednesday morning:
– ASML’s Netherlands-listed shares dropped 7.7%.
– Tokyo Electron shares in Japan closed down nearly 7.5%.
– TSMC’s Taiwan-listed stock fell by 2.4% at market close.
– Nvidia shares were down 4% in Nasdaq pre-market trading.
– Arm stock decreased by 4.86% before market open.
– Applied Materials shares dipped 5.24% in pre-market trading.
The stock declines followed a Bloomberg report on Tuesday that the Biden administration is considering strict trade restrictions if companies like Tokyo Electron and ASML Holding continue to provide China with advanced semiconductor technology. The foreign direct product rule (FDPR) would mark a significant tightening on the sharing of American technology with China. This rule pertains to chips containing even the smallest amount of American-made technology, affecting both U.S. and non-U.S. companies.
Additionally, former President Donald Trump told Bloomberg Businessweek in an extensive interview that he believes Taiwan should compensate the U.S. for its defense. “Taiwan doesn’t give us anything,” he stated. Trump also claimed that Taiwan has dominated America’s semiconductor business. TSMC, based in Hsinchu, Taiwan, is the world’s largest chipmaker, producing about 90% of the most advanced chips globally, which are used in products ranging from iPhones to artificial intelligence models.
Due to Taiwan’s critical role in the global chip industry, concerns about U.S. defense of the island amid increasing military activities by China are particularly alarming.
“If China were to invade, that would shut down and create an economic crisis,” warned House Foreign Affairs Committee Chairman Michael McCaul, following a bipartisan delegation visit to Taiwan in May.