Semiconductor shares listed on Wall Street have lost almost $500 billion in market value since Wednesday, amid fears that trade tensions between China and Taiwan could escalate.
Nvidia shares dropped almost 7 percent, losing over $200 billion in capitalisation. The Nasdaq composite index, which is heavily weighted towards technology, closed New York down 2.8%, or 521.42 points. Meanwhile, the S&P 500 fell 1.4 percent, or 78.93 point, to 5,588.27. The Dow Jones industrial average, on the other hand, closed with its 22nd record of the year and third consecutive record.
Investors were shocked by Donald Trump’s remarks in an interview with Bloomberg, when he said that he wouldn’t pay for the US to defend Taiwan where most of the world’s microchips are produced.
Taiwan Semiconductor Manufacturing is Nvidia’s main contract manufacturer. It has facilities on Taiwan, which are under threat by China.
Bloomberg reported that the Biden administration also warned allies it would impose the strictest trade restrictions if firms like Japan’s Tokyo Electron or the Dutch ASML Holding NV continued to give China access advanced semiconductor production technologies.
The US could impose controls on products made abroad that even use a small amount of American-developed technology.
ASML Holding’s shares, listed in the US, fell by 12.7% after these reports even though they beat estimates for second-quarter profits.
The smaller chipmaker AMD closed at 8 percent, while Arm Holdings (the Cambridge-based microchip firm that is listed on the US stock exchange) closed at 9.6 percent.
The Biden administration has already imposed strict restrictions on Chinese access to cutting edge chip technology. This includes sweeping export restrictions that were issued in October, which limited the exports of artificial-intelligence processors developed by companies such as Nvidia.
Earlier this year, it was discovered that Chinese universities and research institutions had recently purchased high-end Nvidia artificial Intelligence chips from resellers. In China, the sale and purchase are legal.
Intel, GlobalFoundries, and Texas Instruments all have chip manufacturing operations located in the US. These companies are up anywhere between 0.3 and 8.5 percent.
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