Chip stocks are getting routed by political news
Both presidential candidates are doing damage, leading to the chip sector’s worst day in years
Semiconductor stocks staggered through their worst day in four years, as potential new Biden administration regulations on chip-related tech exports to China, and bombastic Trump comments aimed at Taiwan, put a hurt on the sector.
A large part of the downdraft is due to the Biden administration floating the possibility that it could impose harsh new restrictions on companies that export key chip-related technologies to China, including the strategically crucial manufacturers of chip production equipment ASML and Japan’s Tokyo Electron , which were both battered by the news.
Elsewhere, former President Donald J. Trump — who many investors are betting will win in November — upended long-standing assumptions about U.S. commitment to defending Taiwan. That relationship was built in recent decades around the strategic importance of the island’s role as the producer of a large share of the sophisticated microprocessors the American economy relies on — but in an interview with Bloomberg, Trump thew cold water on defending Taiwan:
Asked about America’s commitment to defending Taiwan from China, which views the Asian democracy as a breakaway province, Trump makes it clear that, despite recent bipartisan support for Taiwan, he’s at best lukewarm about standing up to Chinese aggression. Part of his skepticism is grounded in economic resentment. “Taiwan took our chip business from us,” he says. “I mean, how stupid are we? They took all of our chip business. They’re immensely wealthy.” What he wants is for Taiwan to pay the US for protection. “I don’t think we’re any different from an insurance policy. Why? Why are we doing this?”
Taiwan Semiconductor plunged following those comments — its worst drop in four years — and companies that lean heavily on TSMC to produce their chips on a contract basis such as Qualcomm, Broadcom and Nvidia, were also hit.
The best-performing chip stock on the day was longstanding sector laggard Intel, one of the last large domestic producers of semiconductors thought capable of possibly producing the kind of sophisticated chips Taiwan has specialized in for decades.
