The S&P 500 was down 0.9% in early trading. The Dow Jones Industrial Average was down 180 points, or 0.4%, as of 3:35 pm CEST, while the slide for Nvidia and other stocks in the chip industry dragged the Nasdaq composite down a market-leading 1.7%.
Nvidia was the single heaviest weight on the market and dropped 5.7% after it said the US government is restricting exports of its H20 chips to China, citing worries that they could be used to build a supercomputer. The limits could shave roughly $5.5 billion (€4.8bn) off Nvidia’s results for the first quarter, covering charges related to inventory and purchase commitments.
China and the United States, the world’s two largest economies, have been locked in a trade war and raising tariffs and other impediments to trade between each other. But these restrictions on exports for chips used in artificial intelligence technology are getting more support from both US political parties, not just President Donald Trump’s.
Sen. Elizabeth Warren, a Democrat, asked the US Commerce Department earlier this week “to immediately move forward with restrictions on the export of Nvidia’s H20 and other advanced AI chips” to China, saying they could help enhance its military and surveillance operations.
Stocks lag as Trump’s tariff war continues to fan anxieties
Rival chip company Advanced Micro Devices and other companies in the industry also fell sharply on Wednesday, with AMD dropping 5.7%.
In Amsterdam, ASML’s stock sank 5.3%. The Dutch supplier to the chip industry said demand for AI is continuing to drive growth. “However, the recent tariff announcements have increased uncertainty in the macro environment and the situation will remain dynamic for a while,” CEO Christophe Fouquet said.
ASML gave a forecast for revenue in the upcoming quarter that fell short of analysts’ expectations.
The uncertainty around Trump’s trade war has been scrambling plans for companies across industries and around the world. It’s so dynamic that United Airlines gave two different financial forecasts for how it may perform this year, one if there’s a recession and one if not.
The airline said it gave the twin forecasts because it’s “impossible to predict this year with any degree of confidence.”
United’s stock rose 1.2% after it also reported a stronger profit for the latest quarter than analysts expected and said bookings for premium cabins and for international flights are growing.
US recession fears persist, as households feel less optimistic
Many investors along Wall Street are bracing for a possible recession because of Trump’s tariffs, which he has said he hopes will bring manufacturing jobs back to the United States and trim how much more it exports to other countries than it imports.
A survey of global fund managers by Bank of America found expectations for recession are at the fourth-highest level in the last 20 years.
Tariffs could also drive up inflation, at least temporarily, by pushing US importers to pass along the higher costs to their customers.
The tariffs have also gotten US households to feel much more pessimistic about the economy, according to recent surveys. The fear is that such sour moods could drive them to pull back on their spending, which could by itself cause a recession.
If that were to happen, it certainly hasn’t yet. A report on Wednesday showed sales growth at US retailers accelerated by more last month than economists expected. Growth surged to 1.4% in March from April, up from 0.2% the prior month.
Much of that, though, may be because US shoppers were rushing to buy things before tariffs got a chance to raise their prices, including for automobiles and electronics.
Treasury yields eased a bit in the bond market following the report on retail sales. The yield on the 10-year Treasury fell to 4.33% from 4.35% late Tuesday.
In stock markets abroad, indexes fell across much of Europe and Asia.
The FTSE 100 dipped 0.4% in London after the government said inflation in the UK fell for the second month running in March, largely as a result of lower gas prices.
Indexes also dropped 1.9% in Hong Kong, 1% in Tokyo, 1.2% in Seoul and 0.7% in Paris.