The U.S. equity market experienced significant volatility, with the S&P 500 extending a pullback for two consecutive sessions before rebounding sharply on Thursday. The initial sell-off was led by technology stocks, particularly semiconductor companies, reversing part of a strong rally seen earlier in the month. Market sentiment weakened as traders responded to renewed geopolitical and trade-related risks, with a specific focus on potential Chinese restrictions on imports of Nvidia's high-end H200 chips.
The decline centered on semiconductor stocks, with Nvidia facing pressure after reports that Chinese customs authorities advised agents its H200 chips are not permitted to enter the country. This raised significant doubts about near-term revenue growth for companies with high exposure to the Chinese market, which is critical for data center and AI infrastructure demand. The tech stock selloff expanded beyond chips into hardware and cloud-related stocks, amplifying losses across the Nasdaq and S&P 500.
A sharp rebound occurred on Thursday, led by a resurgence in semiconductor shares. Taiwan Semiconductor Manufacturing Co. (TSMC) jumped 4% after reporting a record quarter with a 35% rise in profit, reigniting confidence in AI-driven demand. Other chipmakers like Nvidia, Micron Technology, and Advanced Micro Devices followed with gains of 2% to 4%. The rally came despite President Donald Trump signing a proclamation imposing a 25% tariff on certain semiconductors, though the administration clarified the levy would not apply to chips imported to support the U.S. technology supply chain buildout.
Supporting the rebound, fresh economic data pointed to resilience in the U.S. economy. Initial jobless claims fell to 198,000, well below estimates, and manufacturing surveys from the New York and Philadelphia Federal Reserve banks surprised strongly to the upside. Corporate earnings also provided a mixed boost, with Morgan Stanley shares rising over 1% after exceeding profit expectations.
