Chip stocks fall as Trump’s comments ruffle investors

Semiconductor stock prices fell on Wednesday, after Donald Trump, the former US President said that Taiwan should be responsible for its own defense and reported reports suggested that the US may consider tighter restrictions regarding trade with China.

The Nasdaq Composite Index, which is heavily weighted towards technology stocks, fell by 2.8 percent in New York. This was its worst day since 2022. The S&P 500 index fell 1.4 percent, ending a winning streak of three sessions.

Dan Coatsworth is an investment analyst with AJ Bell. He said that investors have become accustomed to the nonstop positive news about tech stocks. The slightest hint of negativity, however, has caused panic in the markets.

Nvidia and AMD were the two biggest decliners. Nvidia fell 6.6%, while AMD dropped 10.2%. ASML’s worst day in Europe since 2020 was an 11 percent drop. This followed a Bloomberg report stating that the Biden Administration would consider more severe trade restrictions for companies including the Dutch semiconductor equipment manufacturer.

The rout wiped out $496bn from the market value for stocks in the Philadelphia Semiconductor Index, which includes Nvidia TSMC, and Intel.

Trump, Joe Biden’s rival for the presidency, told Bloomberg that Taiwan , which is a major player in the global chipmaking business, should be responsible for its own defense.

Taiwan Semiconductor Manufacturing Co, a leader in the industry and listed on US exchanges, saw its shares fall by 8 percent.

Steve Sosnick is chief market strategist at Interactive Brokers. He said that both political parties are interested in semi-stocks.

Investors have no place to hide if the rotation away from the outperforming tech stocks morphs into an even bigger crash in the megacaps that are driving the rally.

Ajayrajadhyaksha said that the move reflected the increased focus of investors on political risks, the higher odds of Trump winning the US elections over the last three weeks, and the continuation of a “very aggressive trade” away from larger companies and towards smaller ones.

He said: “People are making money on the news because you’ve seen this incredible movement in technology in the past year and a quarter.”

Chip stocks with a greater US manufacturing capability posted gains in contrast to stocks with large Asian exposures. GlobalFoundries shares jumped by almost 7 percent. Intel briefly rose as much as 8 per cent, reaching a three-month peak. However, the gains were lost by the time the market closed.

“There’s been a massive sector rotation over the last week. For example, industrials and other Trump-friendly stocks that fit the narrative of ‘Make America Great’ have rallied. Ted Mortonson is a Baird tech strategist.

This year, the excitement around AI drove huge gains in stock prices for companies like Microsoft and Nvidia. Analysts and investors are beginning to express concerns over how quickly Big Tech can expect to see the returns on its tens or hundreds of millions of dollars invested in AI infrastructure.

Christophe Fouquet is the chief executive officer of ASML in the Netherlands, a leading supplier of high end chipmaking equipment. He said that he believes the chip industry will recover next year, largely driven by AI. However, he admitted there was “a lot of uncertainty” about its pace and form.