The New York stock market plummeted on Wednesday amid a massive sell-off.
The panic selling was triggered by announcements from Nvidia and AMD, revealing that stricter semiconductor export regulations to China had significantly impacted their revenues.
The market’s downward spiral intensified in the afternoon following Federal Reserve Chairman Jerome Powell’s comments expressing concerns about stagflation.
All M7 stocks took a hit, with Nvidia falling 6.9%, Tesla dropping 4.9%, and Apple declining 3.9%.
Market Plunge
The New York stock market saw a sharp decline, led by tech stocks and the semiconductor sector.
The tech-heavy Nasdaq plummeted 516.01 points (3.07%) to close at 16,307.16.
The S&P 500, which reflects broader market conditions, sank 120.93 points (2.24%) to 5,275.70.
The Dow Jones Industrial Average, comprising 30 blue-chip stocks, fared slightly better but still fell over 1.7%, dropping below the 40,000 mark.
The Dow slid 699.57 points (1.73%) to end at 39,669.39.
The CBOE Volatility Index (VIX), Wall Street’s Fear Gauge, surged 2.52 points (8.37%) to 32.64.
Stagflation Concerns
Powell suggested that the U.S. economy could face stagflation due to U.S. President Donald Trump’s tariff policies.
Speaking at the Chicago Economic Club, Powell projected that Trump’s tariffs would lead to higher inflation and slower GDP growth, implying stagflation without explicitly using the term.
Powell expressed concern that these tariffs would put the Federal Reserve into a dilemma between its dual mandates of price stability and economic growth.
If prices rise while growth slows, the Fed would have to decide which goal to prioritize.
Raising interest rates to control inflation could hinder growth while lowering rates to stimulate growth might fuel inflation. Powell cautioned that Trump’s tariffs could trap the Fed in this predicament.
Semiconductor Sector Hit
Semiconductor stocks, particularly Nvidia and AMD, took a severe beating.
Nvidia announced after the market closed the previous day that its H20 chip, designed for the Chinese market, now requires an export license, effectively banning its export. As a result, Nvidia will take a 5.5 billion USD charge this quarter.
AMD reported that its MI308 chip also became subject to export controls, resulting in an 800 million USD revenue loss.
Both companies saw their stocks plummet nearly 10% during trading before closing down around 7%.
Nvidia shares fell 7.71 USD (6.87%) to 104.49 USD, while AMD dropped 7.00 USD (7.35%) to 88.29 USD.
Year-to-date, Nvidia has declined 22%, and AMD has fallen 27%.
The Philadelphia Semiconductor Index (SOX) tumbled 164.73 points (4.10%) to 3,857.17.
The iShares Semiconductor ETF (SOXX) also declined, falling 6.72 USD (3.86%) to 167.39 USD.
Tesla Shares Plunge 4.9%
As Nvidia fell 6.9%, other major tech companies also experienced significant losses.
Tesla’s stock price dropped 12.56 USD (4.94%) to 241.55 USD.
Analysts attribute this decline to concerns over a potential boycott of American products in China, the world’s largest market for new vehicles and electric cars, due to ongoing trade tensions.
Citi analyst Jeff Chen reported that Tesla’s sales in China have plummeted by 15% over the past week.
Stuart Pearson of BNP Paribas Exane warned that Tesla could face boycotts similar to those experienced by South Korean and Japanese automakers during periods of heightened tensions with China.
Pearson noted that during previous tensions, market shares of South Korean and Japanese car brands in China were cut in half.
Apple shares fell 7.87 USD (3.89%) to 194.27 USD, while Alphabet declined 3.18 USD (2.00%) to 155.50 USD.
Amazon dropped 5.26 USD (2.93%) to 174.33 USD, and Microsoft (MS) fell 14.12 USD (3.66%) to 371.61 USD.
Meta Platforms closed down 19.21 USD (3.68%) at 502.31 USD, barely holding above the 500 USD mark.
