Chipmakers Are Getting Hammered By Export Controls, Trade War Worries, and Weaker Demand — It Might Still Not Be the Time To Buy

Between the downsized CoreWeaveCRWV

IPO, OpenAI’s $40B raise, and Microsoft’sMSFT

decision to cancel some data center leases, investors might be scratching their heads — is the bubbly trade that helped float the market throughout 2024 finally ending?

On Wednesday, they might have gotten another clue. In a 24 hours to remember, the semiconductor industry faced a one-two punch that sent stocks tumbling — a product of politics, trade uncertainty, and investor pullback.

Oops, I did it again: It all started to go wrong on Tuesday evening, as chip kingpin NvidiaNVDA

said that the US government would impose export controls on sales of its advanced H20 chips to China — jeopardizing the $17B worth of sales that the chipmaker made to Asian country. By morning, things were even worse, as chip infrastructure giant ASMLASML

met earnings expectations in its earnings report but faulted tariff and trade uncertainty for a weaker forecast. Both revelations weighed on stocks on Tuesday.

• Nvidia said that it would incur about $5.5B in charges as a result of the new rule, pushing the megacap’s stock down more than 8% intraday.
• ASML’s stock tumbled ~8%, too, as demand for its advanced equipment waned in Q1 — it reported net bookings of €3.94B ($4.47B), missing estimates of €4.89B ($5.57B).

The Market’s Getting Chippy (Again)

Both reports sent shockwaves through the markets, with the Nasdaq falling nearly 4% on the news. That was in large part because of the high concentration of the index to chipmakers, which saw even more pronounced declines as the VanEck Semiconductor ETFSMH

fell over 6% intraday.

• BesidesNVDA
  andASML
  , the semiconductor index’s other largest holdings — TSMCTSM
  , BroadcomAVGO
  , and QualcommQCOM
  — fell 3.8%, 3%, and 2.2%.
• Nvidia competitor AMDAMD
  had an even worse day, falling 7% on the China news, as the company warned about its own $800M charge arising from export controls.

Buy the dip? There were signs of a turnaround in the final hour of trading, asSMH

rallied more than 3% from its lows, helping salvage an otherwise ruthless day of trading. But ultimately, what’s top of mind for investors is whether or not chip bellwether Nvidia will be able to keep its strong track record of growth going as a result of the political pressure — and further, whether similar firms will be able to make up for the loss of revenue from both China and potentially the US.