The S&P 500 dropped by 0.9% during early trade sessions. By 3:35 PM Central European Summer Time (CEST), the Dow Jones Industrial Average had fallen by 180 points, equivalent to a 0.4% decrease. Meanwhile, declines in Nvidia shares along with others within the semiconductor sector pulled the Nasdaq Composite index down significantly by 1.7%, leading the broader market downturn.
NVIDIA was the biggest heavyweight on the stock market and saw a decline of 5.7% following an announcement that the U.S. government is limiting exports of its A100 chips to China due to concerns about their potential use in building a supercomputer. These restrictions might reduce NVIDIA's earnings by approximately $5.5 billion (€4.8bn) for the initial quarter, accounting for costs associated with inventory and purchase obligations.
China and the U.S., the globe's top economic powers, have been engaged in a trade conflict, imposing higher tariffs and various barriers to commerce with one another. However, limitations on exporting AI-related semiconductor products are gaining backing across both major American political factions, beyond just those aligned with President Donald Trump.
Senator Elizabeth Warren, a Democrat, requested from the U.S. Commerce Department at the beginning of this week to "proceed promptly with limitations on the export of NVIDIA’s H10 and similar sophisticated AI chips" to China, citing concerns that these technologies might bolster Chinese military capabilities and surveillance activities.
Shares fall behind as Trump's ongoing tariff battle 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’s stock sank 5.3%. The Dutch supplier to the chip industry said demand for AI is continuing to drive growth. “However, the recent tariff announcements have increased uncertainty in the macro environment and the situation will remain dynamic for a while,” CEO Christophe Fouquet said.
ASML provided a prediction for their next-quarter revenue that did not meet the projections anticipated by analysts.
The unpredictability surrounding Trump’s trade war has caused disruptions in planning strategies for businesses spanning various sectors globally. The situation is highly fluid; hence, United Airlines provided distinct financial predictions for potential performance this year, depending on whether there will be a recession or not.
The airline mentioned it provided two predictions as it’s “extremely difficult to forecast this year with any certainty.”
Airline's shares climbed 1.2% following the announcement of better-than-anticipated profits for the recent quarter and an increase in reservations for both high-end seats and overseas trips.
Concerns over an US economic downturn continue, with families becoming more pessimistic.
Numerous investors on Wall Street are preparing for a potential downturn due to Trump's tariffs. He claims these measures aim to repatriate manufacturing jobs 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 is at its second-highest point over the past two decades.
Tariffs might also lead to an increase in inflation, albeit possibly temporary, as they may cause US importers to transfer the elevated expenses to their consumers.
Recent surveys indicate that US household sentiment towards the economy has turned quite negative due to these tariff increases. There’s concern that this bleak 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 stores sped up more than anticipated last month. The increase reached 1.4% in March compared to April, which is an uptick from 0.2% the previous month.
A significant portion of this increase might be attributed to American consumers hastening purchases before tariffs could hike up costs, particularly for vehicles and electronic goods.
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% at the close on Tuesday.
On international stock exchanges, 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.
Indexes also dropped 1.9% in Hong Kong, 1% in Tokyo, 1.2% in Seoul and 0.7% in Paris.