Semiconductor equities faced sharp selling pressure on Friday, with shares of Nvidia Corporation (NASDAQ:NVDA), Broadcom Inc. (NASDAQ:AVGO), Marvell Technology, Inc. (NASDAQ:MRVL), Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM), Intel Corporation (NASDAQ:INTC), Arm Holdings plc (NASDAQ:ARM), and Micron Technology, Inc. (NASDAQ:MU) all trading lower amid intensifying geopolitical friction between Washington and Beijing.
This market reaction reversed earlier weekly gains that were fueled by impressive quarterly results from contract chipmaker Taiwan Semiconductor and chip equipment maker ASML Holding N.V. (NASDAQ:ASML), which had briefly renewed investor optimism over the continued momentum of the AI sector despite global headwinds.
Micron Exit Highlights Regulatory Headwinds in China
The negative sentiment was heightened by Micron Technology’s strategic move to exit China’s data center market following Beijing’s 2023 ban on its products in critical infrastructure.
his divestiture immediately benefits rivals, such as Samsung Electronics Co., Ltd. (OTC:SSNLF) and SK Hynix Inc., as China accelerates its domestic semiconductor development to fill the void left by restricted U.S. suppliers.
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The broader regulatory landscape, which includes crackdowns targeting advanced chips from U.S. firms like Nvidia, reflects how export restrictions, regulatory enforcement, and trade frictions are fundamentally reshaping the semiconductor industry and pressuring U.S. chipmakers' access to the crucial Chinese market.
Tech Giants Accelerate Supply Chain Exodus from China
In response, major U.S. tech giants are accelerating efforts to migrate their manufacturing base away from China. Microsoft Corporation (NASDAQ:MSFT) plans to relocate most of its Surface laptop production and data center server production next year, targeting at least 80% of server components from outside China.
Similarly, Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) Google is expanding server production in Thailand, with one assembler doubling capacity through four new facilities, while Amazon.com, Inc. (NASDAQ:AMZN) Amazon Web Services shifts production of sensitive AI data center servers to non-China locations.
These collective moves underscore efforts to diversify supply chains as trade tensions, customs crackdowns on U.S. chips, and uncertainties in the Taiwan Strait pressure reliance on Chinese manufacturing. These tech giants have been pivotal in driving the AI frenzy by fuelling demand for Nvidia graphics processing units, Broadcom custom chips, and requisite infrastructure.
China Redirects Exports Amid Tariff Uncertainty
In a direct response to unpredictable U.S. tariffs and intensifying trade disputes, Chinese exporters are actively shifting sales away from the United States and redirecting them toward markets in Europe, Latin America, the Middle East, and Africa.
Escalating Tit-for-Tat Trade Disputes
The ongoing cycle of tit-for-tat tariffs, fleeting truces, and looming triple-digit duties on Chinese goods--retaliation for Beijing’s rare earth export curbs--has upended global trade flows, driven down prices, and sharply intensified overseas competition, Reuters reported.
China has simultaneously tightened control over rare earth exports, reinforcing its dominance over materials vital for electric vehicles and defense systems, and expanded licensing requirements for foreign semiconductor users.
Furthermore, Beijing’s sanctions on U.S.-linked Hanwha Ocean Co., Ltd. units have hindered shipbuilding collaboration between Seoul and Washington by blocking the use of Chinese parts and equipment, Reuters reported on Friday.
This latest friction builds on a multi-year strain that began during the pandemic, which led Washington to reshore chipmaking through companies like Taiwan Semiconductor and Intel while restricting China’s access to advanced technology from Nvidia, Micron Technology, and ASML, despite warnings from its semiconductor companies over the economic consequences of losing China as a key market.
Price Action: NVDA stock was trading lower by 1.13% to $179.75 at last check Friday.
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Photo by Tomas Ragina via Shutterstock
