The chip stocks in Asia experienced a significant decline in value on Thursday as a result of a tech selloff on Wall Street. This downward trend was fueled by reports suggesting that the U.S. could be contemplating stricter export restrictions. The repercussions of this speculation were particularly evident in the shares of Taiwan Semiconductor Manufacturing Company (TSMC), which is known as the largest chip supplier in the world. Despite TSMC reporting revenue and profit expectations that exceeded projections for the second quarter, its shares plummeted by up to 4.3% in Asian trade.
The adverse market conditions surrounding the chip industry were not limited to TSMC alone. The suppliers of TSMC, such as Japanese machinery companies Tokyo Electron and Screen Holdings, also suffered substantial losses. Tokyo Electron’s stock price slumped by almost 9%, while Screen Holdings experienced a decline of more than 8%. Additionally, other chip-related stocks in Asia, including Tokyo Ohka Kogyo and Organo, recorded drops of 4.53% and 3.13% respectively.
According to Ayako Yoshioka, a senior portfolio manager at Wealth Enhancement Group, the recent events have had a profound impact on the chip companies that were previously regarded as market favorites. The possibility of tariffs and trade restrictions has cast a shadow over the industry, leading to widespread repercussions for firms involved in chip manufacturing across the globe.
While South Korean chip stocks like Samsung Electronics, SK Hynix, and SK Square experienced significant declines, Yoshioka maintains that there are still buying opportunities for long-term investors. She emphasized the importance of focusing on the potential of artificial intelligence and its profound implications for various industries and consumers. Despite the market fluctuations driven by sentiment and headlines in the short term, the long-term outlook remains promising for those who can navigate through the current challenges.
Yoshioka highlighted that policy obstacles and fluctuations in earnings could serve as catalysts for short-term negative pressure on certain stocks. The implementation of the foreign direct product rule (FDPR) has the potential to create barriers for non-U.S. companies by enabling the U.S. to impose controls on foreign-made products, even if they have minimal American technology components.
The ripple effect of the U.S. export restrictions on the Asian tech stocks was further exacerbated by substantial declines in the stock prices of ASML and Nvidia on Wall Street. ASML Holdings, a key player in the production of cutting-edge chip manufacturing equipment, closed more than 12% lower despite exceeding second-quarter earnings expectations. Other major tech companies, including Arm, AMD, Marvell, Qualcomm, and Broadcom, also witnessed significant stock price decreases.
The prevailing market uncertainty surrounding the global chip industry was intensified by remarks from U.S. Republican presidential candidate Donald Trump, who suggested that Taiwan should compensate the U.S. for defense and accused Taiwan of monopolizing America’s chip business. These geopolitical tensions only served to amplify the volatility in the already fragile tech market landscape.
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