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Global chip stocks experienced a sharp decline, with companies such as ASML, Nvidia, and TSMC posting significant losses. The downturn comes amid reports of potential tighter export restrictions from the U.S. and escalating geopolitical tensions, exacerbated by comments from former U.S. President Donald Trump.
ASML’s shares listed in the Netherlands dropped 11%, while Tokyo Electron shares in Japan closed nearly 7.5% lower. U.S. semiconductor companies including Arm, AMD, Marvell, Qualcomm, and Broadcom all saw their shares fall more than 7%.
The market reaction followed a Bloomberg report on Wednesday, which indicated that the Biden administration is contemplating a comprehensive rule to restrict companies from exporting critical chipmaking equipment to China. The U.S. foreign direct product rule (FDPR) allows Washington to impose controls on foreign-made products if they contain even a minimal amount of American technology, potentially affecting non-U.S. companies.
CNBC has reached out to the U.S. State Department, the Bureau of Industry and Security, and the Office of the U.S. Trade Representative for comments on the report.
Despite reporting earnings that exceeded market expectations for the second quarter, ASML’s stock still fell significantly. Notably, 49% of ASML’s sales during this period were from China, underscoring the substantial risk to the company if stricter export controls are implemented. ASML manufactures machines essential for producing the most advanced chips globally.
Adding to the negative sentiment in the semiconductor sector, former President Trump made controversial remarks regarding Taiwan. In an interview with Bloomberg Businessweek published Tuesday, Trump suggested that Taiwan should compensate the U.S. for its defense and claimed that Taiwan took “about 100%” of America’s semiconductor business.
Trump’s comments have cast uncertainty over the U.S. commitment to defending Taiwan in the event of an attack by China, which considers the democratically governed island part of its territory. The Taiwan-listed shares of Taiwan Semiconductor Manufacturing Co. (TSMC) closed down 2.4% on Wednesday.
The geopolitical tensions also impacted chip stocks in the U.S. The VanEck Semiconductor ETF closed down over 7%, with Super Micro Computer and Applied Materials among the other U.S.-listed companies experiencing significant losses.