Trading in U.S. chip stocks has been volatile recently, with the Philadelphia semiconductor index managing to close higher after a significant tumble on Wednesday. The market saw a rollercoaster ride with contributions from heavyweights like Nvidia and Broadcom. The market was hit hard by reports of the United States considering tighter curbs on exports of advanced chip technology to China. This news sent shockwaves through the industry, causing various chip stocks in Asia to sell-off earlier in the day.
The Global X Asia Semiconductor exchange-traded fund closed down 1.74% on Thursday, reflecting the concerns investors had about the potential impact of trade restrictions. Major holdings like SK Hynix, Tokyo Electron, Taiwan Semiconductor Manufacturing Co (TSMC), and Samsung Electronics experienced declines as a result of the uncertainty in the market. The Philadelphia Semiconductor index had its weakest day since March 2020, falling 6.8% on Wednesday. Although it opened up 1.7% on Thursday, it quickly dropped more than 1% before recovering to close the session up 0.5%.
Some analysts viewed Wednesday’s sell-off as an opportunity to find bargains in the market. Vedvati Shrotre at Evercore ISI suggested that the near-term probability of trade curbs being implemented is low, presenting a unique buying opportunity. Vivek Arya at BofA pointed to the current volatility as an opportunity to invest in companies with the best profitability. However, Daniel Morgan, a portfolio manager at Synovus Trust, warned of more volatility ahead as chip company earnings reports loom on the horizon. He highlighted concerns about the tough stance on trade taken by both U.S. Presidential candidates, Donald Trump and Joe Biden.
Investors are growing increasingly worried about chip companies with high levels of sales exposure to China. The recent tumble in shares of ASML on Wednesday exemplified these concerns as the company discloses significant exposure to the Chinese market. Despite strong results, ASML faced a double-edged sword with worries about its reliance on China for sales. Morgan noted that chip companies have managed to survive and thrive despite previous tariff implementations, hinting at the resilience of the industry.
The uncertainty surrounding U.S. trade policy has been a cause for concern for technology companies, especially in light of potential tariff threats. U.S. presidential candidate Donald Trump’s scheduled speech raised fears about additional tariffs that could impact technology firms. TSMC, the world’s largest contract chipmaker, faced pressure following comments by Trump regarding Taiwan’s chip business and defense payments to the U.S. The company’s shares saw significant declines in Asia but managed to close up in the U.S. market.
The global chip market saw repercussions from the volatility in U.S. trade policy discussions. ASML shares dropped in Europe, while SK Hynix and Tokyo Electron also experienced declines in Asia. The ongoing uncertainty surrounding trade relations between the U.S. and China is likely to continue impacting chip stocks worldwide. Investors are advised to stay vigilant and be prepared for more market fluctuations as the situation unfolds. It is essential for industry players to monitor the developments closely and adapt to the changing landscape of international trade policies.