Chipmaker stocks dive following US policy rumors

The amount of investors holding semiconductor shares has been irregular recently. On Wednesday, July 17, former President Donald Trump made waves by saying he wouldn't defend Taiwan against China in a second term unless Taiwan paid for its "protection." Then, President Joe Biden’s administration reportedly said it is considering new export controls on advanced chip technology to China.

Bloomberg reported that the U.S. might use the "foreign direct product rule" to stop major chip-making equipment suppliers from places like Japan and the Netherlands from giving Chinese chipmakers access to any American technology. This rule would allow the U.S. to impose controls on foreign-made products that use even a small amount of American technology.

The market reaction was swift .

Dutch firm ASML’s shares dropped 12.7% and Tokyo Electron fell 8.7%. American chip equipment makers like Applied Materials, Lam Research and KLA also faced losses, each falling around 10%.

Meanwhile, Taiwan’s TSMC — the world’s largest contract chipmaker — saw an 8% drop. Nvidia, which depends on TSMC for its AI chips, fell 6.6%. The Nasdaq overall closed down 2.8% July 17, its worst day since 2022.

Thursday, July 18, brought some relief as most of the previous day's losers saw partial recoveries. However, the relief was short-lived. Shares fell again as investors remained wary of looming U.S. policy changes.

At a regular press briefing in Beijing on Wednesday, China’s Foreign Ministry spokesman accused the U.S. of “politicizing trade and national security.” He urged other countries to “resist coercion” and support a fair, open international trade order to protect their long-term interests.

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