US stock markets faced substantial losses as leading AI chipmakers suffered setbacks due to new export restrictions to China. Nvidia plunged 6.87%, requiring a US license to sell its H20 chip, while AMD also slumped by 7.35% anticipating an $800 million charge for its MI308. ASML, a key chip-manufacturing hardware maker, dropped over 5% due to missed order expectations and US tariffs causing uncertainty. The tech-heavy Nasdaq index fell by 3%, and the S&P 500 by 2.2%. The focus on China in Trump’s tariff strategy saw both countries imposing high import charges, reflecting the US government’s commitment to safeguard national and economic security.

Nvidia’s China chip is intentionally less potent to comply with past intervention, but concerns persist regarding potential supercomputer use in China. The US government’s move could cost Nvidia $5.5 billion, with indefinite licensing requirements. Despite Nvidia’s substantial investment in US infrastructure, the new restrictions were implemented. Political pressure, including from Senator Elizabeth Warren, influenced limiting chip sales to China.

Federal Reserve Chairman Jerome Powell cautioned that US tariffs might impede economic growth and increase inflation beyond expectations, possibly necessitating interest rate adjustments. Speculation about a US recession escalated following the announcement of import tax details, although a 90-day pause on higher rates allowed for negotiation opportunities. This volatile market situation underscores the intricate interplay between economic policies, national security concerns, and global trade dynamics.