US chip stocks volatile after Asian dip with China-US spat in focus
Corrects typographical errors in paragraph 2, 9, adds missing number in 5, adds missing space in 13
Asia chip stocks extend heavy selloff, U.S. trading choppy
TSMC closes down, posts better-than-expected earnings
ASML adds to losses from previous session
By Sinéad Carew and Youn Ah Moon
NEW YORK/SINGAPORE, July 18 (Reuters) -Trading in U.S. chip stocks was choppy on Thursday after a massive sell-off on Wednesday and a tumble in chip stocks in Asia after a report that the United States was considering tighter curbs on exports of advanced chip technology to China.
Semiconductor stocks took a dive Wednesday after Bloomberg News reported that U.S. President Joe Biden's administration was weighing a measure called the foreign direct product rule that would allow the U.S. government to stop a product from being sold if it was made using American technology.
The reported U.S. move, if it happens, would potentially mean restrictions on companies such as Tokyo Electron 8035.T and the Netherlands' ASML ASML.AS.
The Global X Asia Semiconductor exchange-traded fund 3119.HK closed down 1.74% on Thursday with declines in major holdings including SK Hynix 000660.KS, Tokyo Electron, Taiwan Semiconductor Manufacturing Co (TSMC) 2330.TW, and Samsung Electronics 005930.KS.
After opening up 1.7% on Thursday, the Philadelphia Semiconductor index .SOX reversed course and was down 0.8% on the day following a 6.8% sell-off on Wednesday, which was its biggest one-day drop since March 2020.
Some analysts cited Wednesday's sell-off as a signal to bargain hunt. Vedvati Shrotre at Evercore ISI wrote that the near-term probability the trade curbs would be implemented is low and pointed to "near-term weakness as a unique buying opportunity." Also Vivek Arya at Bofa cited current volatility as "enhanced opportunity in companies with best-profitability."
But Daniel Morgan, portfolio manager at Synovus Trust sees more volatility ahead with chip company earnings due in coming weeks and both U.S. Presidential candidates, Donald Trump and Joe Biden, "taking a tough line" on trade.
"What you were seeing is buying on the weakness and then investors coming to the awareness that this is going to be a recurring concern as we head into the reporting season, that companies with a high level of sales exposure to China may be hurt," said Atlanta, Georgia based Morgan.
He pointed to an almost 11% tumble in shares of ASML ASML.AS on Wednesday to illustrate worries about chip companies that disclose big exposure to China. Investors overlooked strong results at ASML, the biggest supplier of computer chip- making equipment, because roughly half its sales came from China, Morgan said.
But he noted that investors were equally worried about Trump implementing tariffs when he was President yet "chip companies have survived and have done extremely well since then."
The biggest gainers in the U.S. index were Intel INTC.O up 3.8%, GlobalFoundries Inc GFS.O, up 2.3% and NXP Semiconductor NXPI.O, up more than 1%. Artificial intelligence poster-child Nvidia NVDA.O was up just 0.5% while Advanced Micro Devices AMD.O was down more than 3% after falling more than 10% on Wednesday, in its biggest sell-off since October 2022.
After shares of TSMC, the world's largest contract chipmaker, showed some of the biggest declines in Asia, its U.S. traded shares TSM.N were down 3.6%. In Asian trade TSMC had shed T$1.7 trillion ($52.13 billion) market value in two days.
It likely helped that TSMC, the world's largest contract chipmaker, raised its full-year revenue forecast on Thursday on surging artificial intelligence (AI) related demand for chips.
But adding to the gloom for TSMC, U.S. Republican presidential nominee Donald Trump said Taiwan should pay America for its defense.
In Europe ASML shares had closed down 3.6% on Thursday while its U.S. listed shares were off 1.8%.
In Asia, South Korean memory chipmaker SK Hynix had slid 3.6% while Japan's Tokyo Electron, had slumped 8.75%.
TSMC stocks selloff in the wake of Trump comments https://tmsnrt.rs/3xYKyyj
Chip dip https://tmsnrt.rs/4fcnDjR
Reporting by Sinéad Carew and Saqib Iqbal Ahmed in New York, Youn Ah Moon and Joyce Lee in Seoul, Jeanny Kao in Taipei, Ankur Banerjee in Singapore and Alun John in London; Writing by Rae Wee; Editing by Jamie Freed, Christian Schmollinger and David Evans
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