Chip Shares Tumble, Dragging Wall Street to Its Worst Day in Weeks

Shares of some of the world’s biggest chipmakers tumbled on Wednesday, pulling the stock market down to its worst day in months, as investors reacted to U.S. trade tensions with China and comments made by former President Donald J. Trump about Taiwan.

The S&P 500 fell 1.4 percent, its biggest drop since late April, just one day after the index reached a record. The technology-heavy Nasdaq dropped 2.8 percent, on track for its worst day since late 2022.

The decline was led by global chip stocks, with shares of some of the biggest players in the chip industry — including ASML, Nvidia and TSMC — plunging in response to geopolitics and the former president’s remarks.

Here’s what to know about the trading.

• Four chipmakers — Applied Materials, Lam Research, Qualcomm and Advanced Micro Devices — were among the worst performing companies in the S&P 500 on Wednesday, with shares of each company down more than 8 percent.

• The Biden administration is considering tightening its restrictions on companies’ exports of their chip-making equipment to China, Bloomberg reported on Wednesday, an extension of President Biden’s efforts to clamp down on Chinese access to chip technology. News of these looming trade curbs, which could dampen chipmakers’ sales, most likely contributed to investors’ concerns, prompting a sharp drop in chipmaker stocks.

• Mr. Trump’s comments on Tuesday about Taiwan, a country that is crucial to the global chip supply chain, also hurt chip stocks and factored into the market decline. The former president told Bloomberg Businessweek that Taiwan should pay the United States for its defense and accused the country of stealing business from U.S. semiconductor companies. His remarks sent the Taiwanese company TSMC’s U.S.-listed shares down 6 percent. TSMC is the largest contract chip maker in the world.

• Investors have also been rotating out of tech and toward smaller companies in response to broader macroeconomic dynamics. Consumer Price Index data released last week showed a further cool-down in inflation, solidifying investors’ expectations that the Federal Reserve would start to cut interest rates in September. Lower rates would benefit smaller companies’ shares.