Stocks of AI and AI-Adjacent stocks in Taiwan Semiconductor Manufacturing (NYSE: TSM)Arista Network (NYSE: anet)and Vertiv Holdings (NYSE: VRT) All grew on Monday, falling 4.7%, 8.3% and 10.5%, respectively, as of 3:52pm.
All of these stocks were tied to the AI trade, and the movement was probably related to NVIDIA, falling by around 9.8% at the same time.
Where would you invest $1,000 now? Our team of analysts has revealed what we believe is the 10 best stocks to buy now. learn more “
The big drop could be due to a mix of tomorrow’s tariffs and their effects, industry-specific news items, and perhaps a wider range of economic factors around company-specific news in the case of TSMC.
TSMC investment tariffs, Chinese freight, $100 billion
The front and centers for today’s sale were a tariff threat, especially in Canada, Mexico and China. These tariffs have been announced previously, but some investors may have wanted delays or cancellations. However, President Donald Trump confirmed that tariffs are expected to take effect tomorrow.
The biggest fear of tariffs is that they cause stags. This is a bad combination of slowing economic growth along with higher prices. The fear was augmented today by an ISM manufacturing survey from February.
In that survey, the index was 50.3. This was lower than the January 50.9 reading, and lower than the 50.8 economists had predicted. I was a bit worried about the overall index mistakes, but some of the numbers below were even more so. The paid price index jumps from 55.8 to 62.4, much higher than the expected 54.9, indicating inflationary pressure. Meanwhile, the manufacturing employment index fell from 50.3 to 47.6.
The measurements essentially show a stag scenario with a rise in prices as well as lower employment and orders. Needless to say, this report has impacted all economically sensitive stocks, including semiconductors and infrastructure stocks.
The fear of stagflation has permeated the market today. Image source: Getty Images.
Additionally, there have been some new horrors about AI trade over the past few weeks. Nvidia still reported strong numbers and guidance last week, but the market probably wanted more security. TSMC creates Nvidia chips, Vertiv builds many AI data centers around the world, and Arista creates network gear used by many AI data centers. So all three of these strains are somehow linked to Nvidia.
Already present in the sustainability of Nvidia’s growth and sustainability of AI spending benefits, saw another headwind on Sunday. Yesterday, the Wall Street Journal spoke about how China has been able to procure Nvidia chips by circumventing recent US export controls. The story details how a sophisticated network of underground brokers reroutes chip shipments from Singapore to China through other shell companies in Malaysia, Vietnam and Taiwan.
This could also be negative. This indicates that Nvidia’s sales have been inflated to some extent by these re-routed sales to China, and if its trade is fixed, Nvidia could lose its incremental revenue. Additionally, there is the possibility that more stringent export control stages will be broader in semiconductors.
Finally, Taiwanese semiconductor manufacturer CEO CC Wei appeared in Trump today in the White House and announced a $100 billion investment in the US, a massive number that may seem positive, but the announcement is a huge number that doesn’t include subsidies. Rather, the announcement was made to head towards the threat of tariffs in Taiwan, where all production of today’s cutting-edge chips was born.
The $100 billion figure is absolutely huge and very expensive for TSMC, and it is unclear whether the industry will need so much capacity any time soon, considering TSMC’s existing footprint in Taiwan. Although details on investment time frames are somewhat scarce, many investors may be straining TSMC investors.
AI, tariffs, geopolitics do volatile brewing
Artificial intelligence can be the most destructive technology that has been around for a long time. It’s exciting, but semiconductor trading is also very bound by geopolitics.
Investors usually need to try and maintain a cool head on days like today. However, the outlook for recession and geopolitical instability is certainly something to be noted. If it’s comforting, it appears more important than ever to secure future AI hegemony. The companies that provide that value should see value growth over the medium term, but today’s price action certainly wasn’t interesting.
Don’t miss this second chance with a potentially advantageous opportunity
Have you ever felt like you missed a boat when buying the most successful stocks? If you do that, you’ll want to hear this.
In rare cases, a team of analysts issue “double-down” stock recommendations for companies they think they are trying to pop. If you’re worried about having already missed the opportunity to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
nvidia: If you invest $1,000 when it doubled in 2009, It costs $323,920! *Apple: If you invest $1,000 when it doubled in 2008, you’ll have $45,851! *Netflix: If you invest $1,000 when it doubled in 2004, then $528,808! *
Currently, we are issuing “Double Down” alerts to three incredible companies, and we may not have a chance like this anytime soon.
Continues “
*Stock Advisor will return as of March 3, 2025
Billy Duberstein and/or his clients are in a position in Taiwan semiconductor manufacturing. Motley’s Fool has appeared and recommended in Arista Networks, Nvidia, and Taiwan Semiconductor Manufacturing. Motley Fools have a disclosure policy.
The views and opinions expressed herein are the views and opinions of the authors and are not necessarily Nasdaq, Inc. It does not reflect the opinions of
