Nvidia stock and shares of AMD, ASML Holdings, Taiwan Semiconductor and other chip companies fell Wednesday on fears of heightened U.S. trade tensions with China and uncertain relations with Taiwan.
The slump followed comments by Donald Trump, the Republican presidential nominee, to Bloomberg Businessweek that "Taiwan should pay for defense." The statement underlined the important role of the U.S. in helping defend Taiwan, where the major chip manufacturer TSMC is located, against a potential threat from China.
Bloomberg also reported, citing unnamed sources, that the Biden Administration was considering stricter trade restrictions on such companies as Tokyo Electron and ASML if these non-U.S. companies continue to give China access to advanced chip technology.
Finally, ASML beat Q2 views early Wednesday, but gave weak Q3 revenue guidance.
The sell-off hit amid rising belief that Trump will be reelected in November. "Prediction markets are now assigning a high probability of a Trump reelection," a Goldman Sachs analyst said in a Wednesday report.
Nvidia Stock: Chips Take A Hit
Wedbush analyst Daniel Ives also cited the impact of the Republican candidate on the market.
"This is a Trump driven sell-off due to his Taiwan comments and geopolitical fears sparking the chip fears and tech weakness," he told Investor's Business Daily. But Ives also suggested the fears are overblown. "We believe the bark will be worse than the bite and we are not worried."
TSMC stock gave up 7% in early afternoon trades. Taiwan Semiconductor earnings are due early Thursday.
Shares of ASML fell nearly 12% intraday, diving below key levels. The Netherlands-based company just reported results that beat Wall Street estimates, but posted weaker-than-expected sales guidance.
Nvidia stock shed nearly 6%, testing its 10-week line. AMD fell 8%, back to key support.
Many other chipmakers and chip-equipment firms suffered sharp losses Wednesday.
You can follow Benjamin Pimentel on LinkedIn and Twitter/X @benpimentel
