The S&P 500 dropped by 0.9% during initial trades. By 3:35 PM Central European Summer Time, the Dow Jones Industrial Average had fallen by 180 points, equivalent to a 0.4% decrease. Meanwhile, declines in Nvidia shares along with others in the semiconductor sector pulled the Nasdaq Composite index down by a leading 1.7%.
Nvidia stood out as the biggest heavyweight on the stock market and saw a decline of 5.7% following an announcement that the U.S. government has imposed restrictions on exporting its H100 chips to China, expressing concerns about their potential use in constructing a supercomputer. These limitations might reduce approximately $5.5 billion (€4.8bn) from Nvidia’s earnings for the initial quarter, accounting for costs associated with inventory and purchase obligations.
China and the United States, being the globe's top economic powers, have found themselves engaged in a trade conflict with increased duties and barriers imposed on their mutual commerce. However, limitations targeting chip exports crucial for AI development are gaining backing across various U.S. political factions beyond merely those aligned with President Donald Trump.
Senator Elizabeth Warren, a member of the Democratic Party, requested from the U.S. Commerce Department earlier this week to "proceed without delay with limitations on the shipment of NVIDIA's H10 and similar cutting-edge AI technologies" to China. She argued these exports might bolster China's military capabilities and surveillance activities.
Shares fall behind as Trump's ongoing trade war keeps stoking worries.
Competitor semiconductor firm Advanced Micro Devices along with others in the sector experienced significant declines on Wednesday, with AMD’s stock falling by 5.7%.
In Amsterdam, ASML saw its share price drop by 5.3%. The company, which supplies equipment to the semiconductor sector, stated that demand for artificial intelligence continues to fuel expansion. "Nonetheless, the recently introduced tariffs have escalated uncertainties within the broader economic climate, and this state of affairs is expected to stay fluid for some time," explained CEO Christophe Fouquet.
ASML provided a prediction for their future earnings that did not meet the projections set by financial analysts.
The unpredictability surrounding Trump’s trade war has caused disruptions in planning strategies for businesses spanning various sectors globally. The situation is highly volatile; hence, United Airlines provided distinct financial projections for potential performance this year, with one scenario assuming a recession and another anticipating economic growth.
The airline mentioned they provided two predictions as it’s “extremely difficult to forecast this year with any certainty.”
United's shares climbed 1.2% following the announcement of higher profits for the most recent quarter compared to what analysts had forecasted. The company also noted an increase in reservations for both high-end seating classes and overseas trips.
Concerns over a US economic downturn continue, with families becoming more pessimistic.
A number of investors on Wall Street are preparing for a potential downturn due to Trump’s tariffs. He has stated that his aim with these tariffs is to encourage manufacturing jobs to return to the U.S. and reduce the trade deficit.
According to a survey conducted by Bank of America among global fund managers, the anticipation for an economic downturn stands as the fourth highest in the past two decades.
Tariffs might also lead to an increase in inflation, at least for a short period, as they may compel American importers to transfer the elevated expenses to their consumers.
Recent surveys indicate that US household sentiment towards the economy has become significantly gloomier due to these tariff increases. There’s concern that this negative outlook might lead people to reduce their expenditures, potentially triggering an economic downturn all on its own.
Should this occur, it has not happened as of now. According to a report released on Wednesday, sales growth at U.S. retail outlets picked up faster than anticipated last month. The increase reached 1.4% in March compared to April, rising sharply from 0.2% in the previous month.
A significant portion of this increase might be attributed to U.S. consumers hastening purchases ahead of anticipated tariff hikes, which could affect various goods such as cars and electronic devices.
Yields in the bond market decreased slightly after the release of the retail sales report. The rate for the 10-year Treasury dropped to 4.33%, down from 4.35% reported late Tuesday.
On foreign stock markets, indices dropped throughout large parts of Europe and Asia.
The FTSE 100 dipped 0.4% in London after the government said inflation in the UK fell for the second month running in March, largely as a result of lower gas prices.
Indices fell by 1.9% in Hong Kong, 1% in Tokyo, 1.2% in Seoul, and 0.7% in Paris as well.