Trading in U.S. chip stocks was volatile on Thursday, with the Philadelphia Semiconductor Index managing to close higher after a significant drop on Wednesday, driven primarily by heavyweights Nvidia and Broadcom. Earlier on Thursday, chip stocks in Asia had sold off following a report that the United States was considering tighter export restrictions on advanced chip technology to China.
The Biden administration was weighing a measure called the foreign direct product rule, which would allow the U.S. to block the sale of products made with American technology. Following this report, the Global X Asia Semiconductor exchange-traded fund closed down 1.74% on Thursday, with major holdings such as SK Hynix, Tokyo Electron, Taiwan Semiconductor Manufacturing Co (TSMC), and Samsung Electronics all declining.
The Philadelphia Semiconductor Index had fallen 6.8% on Wednesday, its weakest day since March 2020. The index opened up 1.7% on Thursday, dropped more than 1% at its low, and then closed the session up 0.5%. The biggest boosts came from Broadcom, up 2.9%, and Nvidia, up 2.6%. Their gains helped offset declines in stocks like Advanced Micro Devices, which closed down 2.2% after a more than 10% drop on Wednesday, its biggest sell-off since October 2022.
Some analysts saw Wednesday’s sell-off as an opportunity for bargain hunting. Vedvati Shrotre at Evercore ISI noted that the near-term probability of trade curbs being implemented was low, suggesting “near-term weakness as a unique buying opportunity.” Vivek Arya at BofA cited current volatility as an “enhanced opportunity in companies with best profitability.”
However, Daniel Morgan, portfolio manager at Synovus Trust, expects more volatility ahead with chip company earnings due in the coming weeks and both U.S. presidential candidates, Donald Trump and Joe Biden, taking a tough stance on trade. “What you were seeing is buying on the weakness and then investors coming to the awareness that this is going to be a recurring concern as we head into the reporting season, that companies with a high level of sales exposure to China may be hurt,” said Morgan.
He pointed to an almost 11% drop in shares of ASML on Wednesday to illustrate concerns about chip companies with significant exposure to China. Investors overlooked ASML’s strong results because roughly half of its sales came from China, Morgan said. However, he noted that chip companies had survived and thrived despite similar concerns about tariffs during Trump’s presidency.
Some of Thursday’s volatility may have been due to investor fears that Trump would make comments about trade in a scheduled speech later in the day, said Gene Goldman, chief investment officer at Cetera Investment Management in El Segundo, CA. “He may suggest more tariffs, which is a concern for technology companies,” Goldman said.
TSMC, the world’s largest contract chipmaker, has already faced pressure from Trump’s comments earlier this week that Taiwan “did take about 100% of our chip business” and should compensate the U.S. for its defense. On Thursday, TSMC saw significant declines in Asia, shedding T$1.7 trillion ($52.1 billion) in market value over two days. However, its U.S.-traded shares closed up 0.4% on Thursday, likely helped by TSMC raising its full-year revenue forecast due to surging demand for AI-related chips.
In Europe, ASML shares closed down 3.6% on Thursday, while its U.S.-listed shares ended down 0.9%. In Asia, South Korean memory chipmaker SK Hynix slid 3.6%, and Japan’s Tokyo Electron slumped 8.75%.
(Reporting by Sinéad Carew and Sagib Iqbal Ahmed in New York, Youn Ah Moon and Joyce Lee in Seoul, Jeanny Kao in Taipei, Ankur Banerjee in Singapore, and Alun John in London; Writing by Rae Wee; Editing by David Evans and Stephen Coates)
