The United States has warned its allies that it is considering implementing harsh trade restrictions if companies continue to provide China with access to advanced semiconductor technology. This news caused Wall Street’s semiconductor index to plummet by over $480 billion, marking its worst session since 2022. Despite ASML Holding beating second-quarter profit estimates, its US-listed shares dropped by 11 percent, triggering a domino effect that also resulted in significant losses for other chip companies like Nvidia and AMD.
The Biden administration has been aggressive in limiting Chinese access to cutting-edge chip technology, with restrictions issued in October targeting exports of AI processors. This move has impacted US chipmakers’ sales to China, demonstrated by a significant decrease in Nvidia’s revenue from China. On the other hand, companies like Intel, GlobalFoundries, and Texas Instruments, which have chip manufacturing operations in the US, experienced gains as investors speculated that they could benefit from the geopolitical tensions. Despite the market reactions, analysts believe that the fundamental factors driving these markets remain unchanged, with the semiconductor sector continuing to be a key player in the global economy.
Intel, in particular, has been making significant investments to regain its manufacturing edge lost to TSMC, with the support of the US Chips Act signed by President Joe Biden. Policy experts anticipate continued focus on semiconductors in Washington, regardless of the political landscape, with possible additional restrictions on exports to China and increased support for domestic chipmakers like Intel. However, concerns linger over Intel’s ability to revitalize its manufacturing business, given the operating loss recorded in its foundry segment. Overall, the semiconductor industry is in a state of flux, with both challenges and opportunities on the horizon.
