Global Markets Plunge as U.S.-China Tensions Escalate, Semiconductor Stocks Drop 5%

On Wednesday evening, stock markets in Europe and the United States experienced a collective decline. The Nasdaq Composite Index fell by more than 2%, while the S&P 500 Index dropped by more than 1%. European markets also saw declines, with the German DAX Index falling by 0.33%, the French CAC40 Index by 0.51%, and the UK's FTSE 100 Index by 0.30%.

The downturn was particularly pronounced in the semiconductor sector, with major U.S. chip stocks such as ASML, AMD, and NVIDIA all experiencing declines of more than 5%. ASML's first-quarter new orders decreased by 45%, significantly below expectations. AMD also faced challenges due to U.S. export controls on its MI308 product, which could result in up to $800 million in additional costs. NVIDIA's stock dropped by nearly 7% due to U.S. restrictions on the export of its H20 chip to China.

The broader market decline also affected Chinese companies listed in the U.S., with the Nasdaq Golden Dragon China Index falling by more than 2%. Major Chinese tech companies, including Meituan, also saw their stock prices decline. Meituan's stock fell by more than 8%, while JD.com and Alibaba both experienced declines of over 3%.

The collective downturn in the stock markets highlights the interconnected nature of global financial markets and the significant impact that geopolitical tensions can have on investor sentiment and market performance. The decline in semiconductor stocks is a direct result of escalating trade tensions between the U.S. and China, which have led to stricter export controls on AI chips. The U.S. has imposed new restrictions on the export of AI chips to China, including NVIDIA's H20 chip, which is specifically designed for the Chinese market. This move has prompted investment firms to lower their price targets for NVIDIA, reflecting the potential impact on the company's revenue and market position.

Additionally, the recent economic data from the U.S. showed a 1.4% increase in retail sales in March, the largest increase since January 2023. This surge was driven by a significant increase in automobile purchases, as consumers rushed to buy cars before potential tariffs took effect. However, the fluctuating nature of the U.S.'s "reciprocal tariff" plan has raised concerns about an economic slowdown and the credibility of the U.S. dollar. Standard & Poor's Global Ratings warned that the U.S.'s high debt levels and political dysfunction could lead to another downgrade in its credit rating. The World Trade Organization also lowered its forecast for global merchandise trade, predicting a contraction by 2025.

In response to these economic uncertainties, multiple small businesses in the U.S. have filed a lawsuit against the government, arguing that the administration lacks the authority to impose tariffs without congressional approval. The lawsuit, filed by the non-profit, non-partisan legal organization Public Justice Center, represents five small businesses and seeks to block the government from implementing tariffs under the International Emergency Economic Powers Act.