AI Earthquake: Semiconductors Suffer Worst Selloff In Years On Stricter US Chip Exports To China

The semiconductor sector is enduring one of its worst trading days in years, driven by investor concerns over the Biden administration’s potential tightening of regulatory restrictions on chip exports to China.

The iShares Semiconductor ETF SOXX plummeted 5.4% by 12:20 p.m. ET, eyeing the worst session since October 2022. Similarly, the VanEck Semiconductor ETF SMH sunk 5.5%.

Chart: Chipmakers Suffer Worst Day Since October 2022

Image: Benzinga Pro

The Biden administration is considering enacting the harshest trade restrictions if chipmakers continue to grant China access to advanced semiconductor technology, Bloomberg News reported Wednesday.

Dutch chipmaker giant AMSL Holdings NV ASML appears to be a primary target of these heightened U.S. chip restrictions. For the last four quarters, China has remained ASML’s biggest market, with second-quarter sales climbing 21% from the previous period to reach 2.3 billion euros ($2.5 billion).

U.S.-listed shares of ASML fell over 11%, marking the largest one-day drop since March 19, 2020, when shares plummeted 19% due to COVID-related lockdowns.

Bank of America equity analyst Savita Subramanian cautioned that excessive regulation could jeopardize the U.S.’s technological leadership. She added the the government recognizes this and will likely aim to maintain its tech dominance.

It’s “unlikely” that regulatory risks would erode the competitive edge of U.S. technology companies in AI, Subramanian said.

Peter Tchir, a strategist at Academy Securities, said: “A pullback and risk-off trade into July earnings season is good in my view to lower expectations and very elevated and euphoric investor positioning/sentiment in the semi sector.”

Wednesday Movers Among Semiconductor Stocks

• Nvidia Corp. NVDA dropped 5.6%, while Advanced Micro Devices Inc. AMD fell 7.6%, with AMD notably testing the support of its 50-day moving average.
• U.S.-listed shares of Taiwan Semiconductor Manufacturing TSM declined 6.2% following reports that U.S. presidential candidate Donald Trump suggested Taiwan should compensate the U.S. for its defense.
• British chipmaker Arm Holdings plc ARM tumbled 8%.
• Other stocks, including Marvell Technology, Inc. MRVL, Lam Research Corporation LRCX and Applied Materials, Inc. AMAT, saw losses exceeding 7%.
• Qualcomm Inc. QCOM and Broadcom Inc. AVGO each decreased by 6%.
• In contrast, Intel Corp. INTC and Texas Instruments Inc. TXN were the only major chipmakers trading in the green, up 2.4% and 0.7%, respectively.

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