US Semiconductor Stocks Brace for China Trade War Impact

Germany is heading for early elections after Chancellor Olaf Scholz lost a vote of confidence. The market was prepared: Germany’s main stock index, the Dax, barely moved and Bund yields were steady. It has been a wild year for democracy. Let’s hope things calm down over the holidays (looking at you, Brazil). Email us: robert.armstrong@ft.com and aiden.reiter@ft.com. The semiconductor industry is the place where the euphoric US stock market and America’s trade war with China meet.

For the past two years, AI hype has supercharged American semi stocks, including chipmakers Nvidia, AMD, Broadcom and Micron, as well as makers of chipmaking tools such as Lam Research, Applied Materials and KLA. (Nvidia is not included in this graph because its epic gains would have made everyone else’s impossible to distinguish.) At the same time, the Biden administration has tried to limit the sale of chips and chipmaking tools to China. In October 2022, Washington banned the export of the most advanced chips and manufacturing equipment to Chinese companies with government ties. It followed up in October 2023, closing loopholes and restricting sales to data centres. Earlier this month, the US cracked down on more Chinese companies and pushed US allies to get more strict. The market appeared to anticipate the earlier announcements with trepidation, only to recover. Here is a graph of the the iShares US Semiconductor ETF, which tracks the major US semi stocks, with the period of the announcements shaded: Cyclicality has been more important to the sector than the China rules. Most chip stocks, except AI favourites Nvidia and Broadcom, have been down since July, as demand has started to waver. Intel and Samsung in particular are struggling. The toolmakers — including the three big US players KLA, Lam and Applied Materials, as well as Dutch ASML and Japanese Tokyo Electron — were at the centre of the December regulation

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