Key Takeaways
- Intel and GlobalFoundries shares gained Wednesday while Nvidia, ASML, and other chip stocks fell amid concerns about tightening trade restrictions and geopolitical tensions affecting the chip industry.
- The Biden administration is reportedly considering strengthening restrictions on chip exports to China, which could hit sales for many chip-related companies like ASML.
- Former President Donald Trump said Taiwan, where chips for many of the biggest tech giants in the U.S. are manufactured, should pay the U.S. for defense, adding to geopolitical worries.
- As Intel and GlobalFoundries have manufacturing capabilities in the U.S., they could stand to benefit from support for domestic chip manufacturing as geopolitical tensions rise.
Intel (INTC) and GlobalFoundries (GFS) shares rose Wednesday, while Nvidia (NVDA) and other chip stocks tumbled, amid concerns about tightening trade restrictions and rising geopolitical tensions affecting the chip industry.
GlobalFoundries led gains on the Nasdaq with shares up more than 6% around 2 p.m. ET Wednesday. Intel climbed close to 2%. Meanwhile, chip manufacturing equipment maker ASML (ASML) led losses on the Nasdaq, falling nearly 12%. Shares of Advanced Micro Devices (AMD), Qualcomm (QCOM), and others were also lower, with the VanEck Semiconductor ETF (SMH) down 6%.
Taiwan-based chip manufacturing giant Taiwan Semiconductor Manufacturing Company (TSM) is a key player in the space, supplying fabless companies like Nvidia, Qualcomm, AMD, and others with the hardware necessary to make their products. American depositary receipts (ADRs) of TSMC also dropped Wednesday.
Intel and GlobalFoundries have manufacturing capabilities in the U.S., and could stand to benefit from support for domestic chip manufacturing as geopolitical tensions rise.
How Stricter Trade Restrictions Could Affect the Chipmaking Industry
The Biden administration is reportedly considering implementing stricter trade restrictions on exports to China, which could hurt sales for ASML and many other chip-related companies, according to Bloomberg.
Imposing the foreign direct product rule (FDPR) would allow the U.S. to curb exports of goods made in other countries that use American tech. That could for example hold back revenue for the Netherlands’ ASML, which makes lithography technology essential in mass-producing semiconductors, since China represents the company’s largest market.
Separately, former President Donald Trump said in an interview with Bloomberg Businessweek that Taiwan, where chips for many of the biggest tech giants in the U.S. are manufactured, should pay the U.S. for defense, adding to geopolitical worries.
The Biden administration’s CHIPS and Science Act has invested billions of dollars to support chip manufacturing in the U.S. and reduce reliance on other countries.