Traders and investors are not known for being timid. With
mental and emotional toughness as a natural trait, few things can truly
unsettle them. However, comments by former President Donald Trump have shaken
their confidence.
Shares of some of the world’s largest chipmakers have
dropped following Trump’s statement that Taiwan, a key player in the global
industry, should
pay for its own defense against China. What’s
more, the Biden administration has vowed to impose stricter restrictions on
U.S. chip exports to China.
Nvidia experienced the
largest decline, with its market capitalization
falling by more than $200 billion, or 6.7%. Taiwan Semiconductor Manufacturing
Co., the world’s largest contract chipmaker, saw its stock drop by 8%. Even
outside the chip sector, companies within the Magnificent Seven club were
affected, with Meta’s stock plunging 5.7%.
The Magnificent Seven stocks collectively lost about $500 billion in value
yesterday. Last Wednesday, this elite group faced another significant blow,
losing more than $600 billion in total valuation.
Beyond the chip industry, Nvidia has been caught in a
broader selloff impacting the megacap tech sector. The selloff in Nvidia erased
over $200 billion from its
market cap, highlighting the extreme volatility of this major public
company. Just recently, at the end of June, Nvidia rattled markets when more
than $500 billion was wiped out over a three-day period.
Investors are now concerned about the possibility of
further trade restrictions on the U.S. chip industry. Trump’s remarks are
particularly alarming as they could disrupt the longstanding diplomatic
relationship between the U.S. and Taiwan. This
stance could have major implications for Taiwan’s dominance in semiconductor
chip manufacturing if a conflict between Taiwan and China arises, potentially
causing a catastrophic disruption in the global chip supply chain and severely
impacting the U.S. economy.
