Chip Stocks Fall on Possible Export Restrictions

Tech stocks, and particularly shares of semiconductor firms, have played a key role in driving major U.S. equities indexes to record highs, but the tides changed on Wednesday.

The broad-based S&P 500 fell 1.4%, while the tech-heavy Nasdaq plunged 2.8%. The Dow ended the day 0.6% higher, boosted by a rotation away from tech and outperformance from several constituents in the health care sector.

Geopolitical uncertainty dragged down the tech sector following reports that the U.S. is considering rules that would rein in exports of semiconductor equipment to China. Shares of companies in the semiconductor industry dominated the list of the S&P 500’s weakest daily performers. Equipment suppliers Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp. (KLAC) all dropped roughly 10%. So did Advanced Micro Devices (AMD). Several other S&P 500 chipmakers were down in the 8% to 9% range.

Vistra Corp. (VST) shares sank 11.3%, the steepest losses of any S&P 500 stock. The utility stock posted outsized gains in the first half of 2024, driven by optimism that it could benefit from a boost in energy demand from data centers running artificial intelligence (AI) applications, but it has changed course in July. The losses come amid questions about the power grid in the company’s home state of Texas after significant outages in the wake of Hurricane Beryl.

The wind came out of shares of GE Vernova (GEV), spun off from the GE conglomerate in April, which plunged 9.3%. The independent power company’s shares lost ground amid anticipation of a potential return to the presidency for Donald Trump, who has been a vocal opponent of generating energy using wind turbines, which account for a major part of GE Vernova’s business.

Another April spinoff fared much better on the day. Shares of Solventum (SOLV), the health care firm that separated from 3M (MMM), notched the best performance in the S&P 500, gaining 5.9%. Although Morgan Stanley cut its price target on Solventum stock earlier this week, analysts said they still have a favorable outlook for the medical technology industry, forecasting strong utilization and volumes.

Progressive (PGR) shares were up 5.4%, reversing losses posted in the previous session after the property and casualty insurer posted mixed quarterly results. Although revenue came in shy of estimates, profits were better than expected, and analysts noted strength in Progressive’s underwriting profitability.

Shares of dental and medical products supplier Henry Schein (HSIC) also added 5.4%. The company cut the ribbon last week on a new distribution center in Fort Worth, Texas. At 811,000 square feet, the new facility is the largest in Henry Schein’s global network.

FMC Corp. (FMC) shares advanced 4.6%. The agricultural sciences firm announced the appointment of John M. Raines to its board of directors. Raines arrives with more than three decades of experience that includes key roles at top food and agriculture companies.