Chip Stocks Plummet $500 Billion Amid China Trade Panic! What’s Next?

Chip stocks fell more than $500 billion because of trade tensions between the US and China. This was made worse by plans to put tighter limits on semiconductor tech exports and controversial comments made by US politicians, which caused worries and market volatility.

Wednesday was the worst day for Wall Street’s semiconductor index since 2020. It lost more than $500 billion in value after a report said the US was thinking about putting stricter limits on sending advanced chip technology to China.

Chip stocks went down even more after Republican presidential candidate Donald Trump said that Taiwan, a key production hub, should pay the US for its defence.

Washington has become more protective of the U.S. semiconductor production industry in recent years because it sees it as strategically important to compete with China. This has caused chip investors to have new worries.

Bloomberg News reported on Tuesday that the US has told partners it is thinking about using the strictest trade restrictions possible if companies keep giving China access to advanced semiconductor technology.

ASML Holding (ASML.AS), a Dutch company that makes tools for making chips, saw its U.S.-listed shares drop 13% after the report, even though it beat expectations for second-quarter profits. The market value of AI giant Nvidia dropped by more than $200 billion, or almost 7%. Rival AMD, opens in a new tab, and Arm both fell about 10%. Broadcom dropped 8% and Micron  dropped 6%.

Mixed Reactions Among US Chipmakers

A lot of companies that make chips in the U.S. did better. For example, GlobalFoundries jumped almost 7% and Intel climbed 0.35%. Intel is building several plants in the country, so some experts think the political unrest could be good for the company.

President Joe Biden’s government has taken strong steps to limit China’s access to cutting-edge chip technology. For example, in October, broad restrictions were put in place to limit exports of AI processors made by companies like Nvidia.

The US doesn’t give Taiwan anything, so Trump told Bloomberg Businessweek that Taiwan should pay for its own protection. Trump is running to become president again on November 5. That caused shares of Taiwan’s TSMC, which makes the most contract chips in the world, to drop 8% on the U.S. stock market. Taiwan is a very important part of the world’s chip supply line. Analysts have said that a fight over the island could destroy the world economy.