Semiconductor shares have spent the last couple days on quite a rollercoaster ride.
Yesterday was all doom and gloom. With Donald Trump having already shaken the sector by warning he wouldn't defend Taiwan against China during a second presidency unless Taiwan paid for its “insurance,” incumbent President Joe Biden's administration caused a mini-meltdown by reportedly considering major new export controls.
Specifically, Bloomberg reported that the U.S. could invoke a measure called the foreign direct product rule to try stopping major chipmaking equipment providers like the Netherlands’ ASML and Japan’s Tokyo Electron from giving Chinese chipmakers access to any American tech at all. The Biden administration has already browbeaten these companies into not selling their cutting-edge wares to Chinese chipmakers, but the move that’s being considered would end their servicing of existing machinery—which may break down in months as a result.
ASML’s shares lost an eighth of their value on that news, while Tokyo Electron was down 8.7%. American chipmaking equipment makers, which think over-pressuring the Netherlands and Japan might cause them to stop cooperating, didn’t fare much better. Applied Materials, Lam, and KLA were all down around 10%.
Meanwhile, the share price of Taiwan’s TSMC, the world’s biggest contract chipmaker, dropped 8% and that of Nvidia—which relies on TSMC to manufacture its industry-leading AI chips—fell 6.6%. The Nasdaq as a whole fell 2.8%, giving the exchange its worst day since 2022. (Interestingly, chipmakers Intel and GlobalFoundries both had a good Wednesday, perhaps because they have significant manufacturing facilities in the U.S. and could benefit from either Trump or Biden’s policies.)
Then, today, the sun came out. Most of the above-mentioned Wednesday losers rose again, with the biggest recoveries—albeit still only partial—being TSMC and Nvidia, which were both up over 3% at one point.
That’s because TSMC today boosted its full-year revenue forecast on the back of strong AI chip demand. Here’s TSMC CEO and chairman C.C. Wei, in a Reuters-reported quote that’s one piece of punctuation away from fitting into the Mugatu meme: “AI is so hot; right now everybody, all my customers, want to put AI functionality into their devices.”
But then TSMC and everyone else's shares fell again, reentering the red as investors continue to take fright at the U.S. moves that could be around the corner.
And there you have it: a perfect microcosm of the tech industry’s big concerns this year. Geopolitical jitters rubbing up against AI euphoria. These are narratives in motion, and they won’t be settling down anytime soon.
More news below.
David Meyer
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