Nvidia, ASML and Other Chip Stocks Sink on Worries About Tougher Trade Curbs, Geopolitics

Nvidia (NVDA), Qualcomm (QCOM), and other chip stocks tumbled Wednesday following reports of potential government moves that could negatively impact the sector.

Especially hard hit were New York Registry Shares of ASML (ASML), which makes equipment to manufacture semiconductors, following reports the Biden administration is considering tightening restrictions on exports of semiconductor equipment to China.

The news overshadowed ASML’s solid results on rising demand for artificial intelligence (AI) chips, with ASML reporting second-quarter net bookings jumped 24% from a year ago to 5.6 billion euros ($6.12 billion), beating forecasts.

How Tighter Trade Curbs Could Affect Chip Companies

The White House is reportedly considering imposing what’s known as the foreign direct product rule (FDPR), that would allows the U.S. to impose controls on products made outside the country that use even a small amount of American technology.

The measure could be used to target products from companies like the Netherlands’ ASML, which made nearly half of its revenue in the second quarter from sales to China and could take a hit from the move.

Separately, former President Donald Trump said in an interview with Bloomberg Businessweek that Taiwan should pay the U.S. for defense, raising concerns about how geopolitical tensions could affect the chip industry.

Taiwan dominates the global market for semiconductor manufacturing, thanks to TSMC (TSM), and American depositary receipts (ADRs) of the chip manufacturing giant plunged Wednesday as well.