Chip stocks in Asia experienced a significant decline

Chip stocks across Asia experienced a significant decline on Thursday, following a tech selloff on Wall Street. Reports suggesting that the United States is considering the imposition of tighter export restrictions intensified the negative sentiment. Leading chip supplier, Taiwan Semiconductor Manufacturing Company (TSMC), witnessed a drop of up to 4.3% in Asian trade, although losses were partially recovered. TSMC reported better-than-expected revenue and profit expectations for the second quarter. However, TSMC's suppliers also suffered, with Tokyo Electron, a Japanese machinery firm, falling by nearly 9%, and Screen Holdings experiencing a decrease of over 8%.

Additionally, other chip-related stocks, such as Tokyo Ohka Kogyo, a lithography materials provider, and Organo, an industrial water company, recorded declines of 4.53% and 3.13% respectively. A recent Bloomberg report fueled concerns by suggesting that the Biden administration may enforce restrictions on companies exporting critical chipmaking equipment to China, further exacerbating tensions between the two economic powers.

This turn of events greatly impacted the South Korean chip sector as well. Samsung Electronics saw a slide of nearly 2%, while SK Hynix and SK Square tumbled nearly 5% and 10% respectively. Despite these developments, Ayako Yoshioka, senior portfolio manager at Wealth Enhancement Group, believes that opportunities for long-term investors continue to exist. She emphasized the significance of focusing on the promise of artificial intelligence (AI) and how it can revolutionize various industries and benefit businesses and consumers in the long run. Yoshioka also cautioned that policy hurdles and high earnings expectations during the earnings season may create short-term negative pressure on certain stocks.

The concerns regarding chip stocks were compounded by recent declines in ASML and Nvidia on Wall Street, with losses amounting to 12% and 7% respectively. These developments highlight the vulnerability of the global chip industry to trade tensions and regulatory restrictions. Nevertheless, many market participants remain optimistic about the long-term growth potential of chip companies, particularly due to the increasing integration of AI in various sectors.