By Dean Seal

Shares of semiconductor companies are sliding after the opening bell as investors react to new geopolitical concerns surrounding top chip exporters China and Taiwan.

Shares of sector heavyweight Nvidia were down 4.8% at $120.26 in early trading. Qualcomm stock was down 6.3% at $196.42 and Micron Technology shares were down 4.1% at $122.22. American depositary receipts for ASML, Europe's most valuable technology company, were down 10% at $961.42.

The selloff follows a Bloomberg Businessweek interview with Republican Presidential candidate Donald Trump Tuesday, in which he said Taiwan should pay the U.S. for defense and expressed skepticism about fighting Chinese aggression. A tougher political stance on China or Taiwan could further pressure the industry as it deals with an inventory glut after the makers of consumer devices, cars and industrial equipment spent years stockpiling chips.

Chipmaker ASML on Wednesday reported that revenue from system sales to China were up 20% in the second quarter and made up nearly half of the total top line. That could be a problem now that the current White House wants the Netherlands and Japan to tighten export controls to China, according to a Bloomberg report from early Wednesday.

The Netherlands is ASML's home country, while competitor Tokyo Electron is domiciled in Japan. Tokyo Electron's American depositary receipts were down 9.6% at $102.74 in early trading. American depositary receipts of Taiwan Semiconductor Manufacturing, a top customer for ASML, were down 6.5% at $173.91.

ASML's results for the second quarter came in above analyst projections, though its guidance for sales in the current quarter to top out at EUR7.3 billion missed forecasts.

Susquehanna analyst Christopher Rolland said in a note Wednesday morning that broad-based headwinds in the industry are expected to continue, albeit at an uneven pace as different markets and companies progress through the downcycle at different speeds.

Rolland said the AI-initiatives Apple unveiled at its latest developer conference will be a tailwind for smartphone shipments in 2024 and 2025, while persistent weakness in the 5G market will keep manufacturers working through inventory and mixed carrier demand.

Qualcomm's stock decline comes after Oppenheimer analysts said in a research note Wednesday that the company is getting outpaced by MediaTek in the land grab for 5G smartphone market share, driven by rising shipments of lower-priced phones.

Write to Dean Seal at dean.seal@wsj.com


(END) Dow Jones Newswires

07-17-24 1027ET