US stock markets experienced a downturn on Wednesday, primarily triggered by Nvidia’s announcement regarding hefty financial impacts from new US restrictions on chip exports to China. This news rattled investors, causing notable declines among major chip manufacturers. The broader market felt the effects, leading to significant drops in key indices as traders reacted to the evolving landscape of trade tensions.
Market Reaction to Chip Export Restrictions
Nvidia, a leader in AI chip manufacturing, saw its stock plummet by 7.42%, while AMD and Micron Technology followed suit with losses of 6.84% and 1.4%, respectively. Other tech giants like Broadcom and Intel Corp also faced declines of 2.80% and 2.95%.
By midday, the market indices reflected this sentiment:
- Dow Jones: fell 0.52%
- S&P 500: decreased by 1.24%
- Nasdaq Composite: dropped 2.13%
At the opening bell, the Dow Jones Industrial Average was down 189.5 points to 40,179.49, while the S&P 500 and Nasdaq Composite fell to 5,335.75 and 16,499.693, respectively.
New Export Licensing Norms and Financial Forecasts
The US Commerce Department’s recent announcement of new export licensing rules for Nvidia’s H20 and AMD’s MI308 AI chips directed at China has raised alarm. Nvidia indicated it might incur charges as high as $5.5 billion due to these restrictions. Similarly, AMD projected potential costs of up to $800 million.
These measures are part of a broader strategy by the US government aimed at limiting advanced semiconductor sales to China. In parallel, former President Donald Trump has initiated investigations into possible tariffs on critical mineral imports, alongside a review of pharmaceutical and chip import policies.
Ongoing Trade Tensions
The trade relationship between the United States and China, two of the world’s largest economies, continues to be strained, with both nations imposing tariffs on various goods. In the bond market, the yield on the 10-year Treasury fell slightly to 4.33%, down from 4.35% from the previous day.
Company Performance Highlights
In contrast to the broader market’s decline, United Airlines saw its stock rise by 2.5% after reporting stronger-than-expected profits for the first quarter. On the other hand, Tesla shares dropped 1.5% following reports of disruptions in production due to tariffs on Chinese auto parts. Other notable tech stocks, including Apple (down 2.22%), Microsoft Corp. (down 1.93%), and Meta Platforms (down 2.35%), also suffered losses.
Commodities Market Surge
In the commodities arena, gold prices soared, surpassing $3,300 per ounce, driven by a weakening US dollar and escalating trade tensions with China. As of 08:51 AM ET, spot gold increased by 2.6% to $3,310.82, reaching a record high of $3,317.90 earlier in the day. Silver and platinum also experienced gains, with spot silver rising to $33.01 and platinum climbing to $963.76.
Oil Prices on the Rise
Additionally, oil prices surged by approximately 1% following news that Iraq plans to cut production in April. Brent crude futures gained 70 cents to reach $65.37 a barrel, while US West Texas Intermediate crude also rose by 70 cents, settling at $62.03.
As the market grapples with reactions to these developments, investors are keenly watching for further updates on trade policies and their implications for the economy.
