The world’s largest computer chipmaker, Taiwan Semi (NYSE:TSM), is one of the top trending stocks today, and TSM stock is retreating 6.6% in early trading. Former President Donald Trump, who recently officially became the Republican nominee for president, said that Taiwan should pay the U.S. for defending the island.
A report that the Biden administration may ramp up restrictions on the export of chips to China is also weighing on TSM stock and the shares of other chipmakers.
The latter developments overshadowed higher-than-expected second-quarter bookings by Netherlands-based ASML (NASDAQ:ASML). The Dutch firm’s machines are used to manufacture chips.
Trump’s Comments Amid Aggressive China Moves
Trump claimed that Taiwan “did take about 100% of our chip business.” He added that Taiwan should pay the U.S. for defending it and that he believes that “Taiwan doesn’t give us anything.”
In response, Taiwan’s premier said: “We are willing to take on more responsibility; we are defending ourselves and ensuring our security.”
It is unclear how Trump’s proposal would align with the Taiwan Relations Act. That law legally requires the government “to provide Taiwan with the means to defend itself. “
Taiwan Semi makes most of its advanced chips in Taiwan, although it has begun building plants in other countries in recent years.
Four days ago, Taiwan noted that it was monitoring “waves of test-firing” of Chinese missiles within China. And last week, Taiwan reported that China had flown 66 warplanes near the island in a 24-hour period. Beijing contends that Taiwan is part of China.
U.S. May Tighten Restrictions
Bloomberg reported, citing unnamed sources, that the U.S. may employ “the most severe trade restrictions available” to prevent Western companies from exporting advanced chips to China.
ASMl, which supplies lithography machines used to make semiconductors, reported this morning that it had booked 5.57 billion euros in Q2, meaningfully above analysts’ average estimate of 5.04 billion euros.
However, ASML stock and TSM stock are nonetheless dropping sharply this morning.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in TSM.
