Good morning. Here's what happened overnight and what you need to know today.
1.
Chip chokehold: The Biden administration is considering the strictest trade measures available to curb China's access to advanced semiconductor technology, targeting companies like Tokyo Electron and ASML Holding, which make vital chipmaking machinery. Bloomberg reports, citing unnamed sources, that the administration is telling allies it may use a foreign direct product rule (FDPR) to control foreign-made products containing any US technology. The measures face resistance from American and international stakeholders. The US wants to pressure Japan and the Netherlands to limit their companies' ability to service and repair restricted equipment already in China, which American companies are barred from doing, Bloomberg said. Meanwhile US companies affected by existing restrictions, such as Applied Materials, Lam Research and KLA Corp, argue the current restrictions have curtailed revenue opportunities for American semiconductor companies and failed to halt Chinese progress. Shares of Tokyo Electron and ASML dropped by over 8% and 11.5%, respectively, following the news, overshadowing solid Q2 earnings from the latter which beat market forecasts. (Bloomberg)
2.
Tech bump: The Nasdaq fell almost 3%, reflecting a global selloff of chipmaker shares after former President Donald Trump said Taiwan should pay the US for protection against Chinese military aggression. In a lengthy Bloomberg interview, Trump, the Republican presidential nominee, also alleged Taiwan had taken over America’s semiconductor industry. The comments raised concerns about the security of the global semiconductor supply chain. Shares in Nvidia, Super Micro Computer and Taiwan Semiconductor Manufacturing Company (TSMC), which was expected to unveil a 30% jump in quarterly profit, each fell 6.6%, 6.9% and 7.2% respectively. Investor sentiment was further hurt by reports the Biden administration is considering measures to prevent technology sharing with China that could severely impact both US and non-US firms supplying advanced semiconductor technology to the Asian nation. Arm shares also fell 9.5% and Applied Materials dropped 10.48%. (Reuters)(Quartz)(Barrons)
