Global semiconductor stocks experienced a dramatic sell-off on July 17 and 18, 2024, triggered by escalating US-China trade tensions and controversial comments about Taiwan by former US President Donald Trump. The tech-heavy Nasdaq index fell 2.8% to 17,996 points, while the Philadelphia Semiconductor Index plunged nearly 7%. Asian markets followed suit, with major chip manufacturers bearing the brunt of the downturn.Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, lost approximately NT$1 trillion (US$61.35 billion) in market value over two days. Other major players in the industry, including Nvidia, Samsung Electronics, and SK Hynix, also suffered significant losses. The Global X Asia Semiconductor ETF dropped 2.7%, reducing its year-to-date gains to 13.5%.The market turmoil was primarily attributed to two factors. First, reports emerged that the Biden administration is considering imposing stricter curbs on exports of advanced semiconductor technology to China. The proposed measures, known as the foreign direct product rule, could potentially block the sale of products made using American technology. Second, Donald Trump’s comments in a Bloomberg Businessweek interview, where he stated that Taiwan ‘should pay to be protected’ by the US, added to the geopolitical uncertainty.Despite the market downturn, some analysts believe that macro and geopolitical factors played a larger role than fundamentals in the sell-off. TSMC reported better-than-expected profit for the latest quarter, highlighting the disconnect between company performance and market reaction.The semiconductor industry’s volatility has raised concerns about a potential new trade war between the US and China. As the situation continues to develop, investors and industry leaders are closely watching for any further policy announcements or geopolitical developments that could impact the global chip supply chain.
Key points
- Global semiconductor stocks experienced a major sell-off due to US-China trade tensions and Trump’s comments on Taiwan.
- TSMC lost approximately US$61.
- The Biden administration is considering stricter curbs on semiconductor technology exports to China.
- Analysts suggest geopolitical factors outweighed fundamentals in driving the market downturn.
35 billion in market value over two days.
Contradictions👾While most Asian markets fell, Hong Kong’s Hang Seng Index continued to rise, showing some divergence in market reactions.
