Slowdown And Tariff Talk Grips The Hottest Sector On Wall Street - Semiconductor ETF Now Has A Negative 1-Year Return

On Monday, Artificial intelligence chip stocks, including Nvidia Corp (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Co (NYSE:TSM), Broadcom Inc (NASDAQ:AVGO), Arm Holdings (NASDAQ:ARM), Micron Technology, Inc (NASDAQ:MU), Marvell Technology, Inc (NASDAQ:MRVL), Qualcomm Inc (NASDAQ:QCOM) were sliding.

Some reports indicate that the U.S. chip subsidies for contract chipmakers like Taiwan Semiconductor may be scrapped. President Donald Trump recently revealed his want to scrap the U.S. CHIPS Act.

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Trump is due to meet with the leaders of some of the leading tech companies, including HP Inc (NYSE:HPQ), Intel Corp (NASDAQ:INTC), International Business Machines Corp (NYSE:IBM), and Qualcomm, which are vulnerable to potential stricter tariff policies in the computer hardware industry.

Tariffs can make manufacturing hubs like China more expensive and potentially disrupt supply chains.

A lot has been brewing in the AI space since ChatGPT parent OpenAI’s emergence triggered an AI frenzy, prompting global Big Tech giants and startups to splurge on their AI ambitions.

Meanwhile, the U.S. imposed multiple semiconductor sanctions on China, restricting its access to sophisticated semiconductor technology, including AI, citing national security threats.

Today, the VanEck Semiconductor ETF (NASDAQ:SMH), which trades as a proxy for the top semiconductor stocks, slid into negative return territory on a one-year basis. SMH now has an annual negative return of 2.93% at the time of writing.

SMH had a 52-week high of $283.07 and has fallen 24.20% since. On a year-to-date basis, SMH is down 11.50%. Its biggest holding, Nvidia, is down 30% from its 52-week high of $153.13.

Though Nvidia has lost 20% year-to-date, it is still up by 24.75% on a one-year basis. Its peer Broadcom is still up 42% on a one-year basis but down 20.50% year-to-date. Taiwan Semiconductor is down 14% year-to-date.

The U.S. semiconductor sector has been hot since the AI buzz. However, China caught up in the AI race when DeepSeek launched and claimed that its AI model was built at a fraction of the cost compared to legacy models like ChatGPT.

The U.S. may ban DeepSeek’s chatbot from government devices over national security concerns, joining allies like Italy and Canada.

DeepSeek claim cost Nvidia $600 billion in market capitalization in a single day. The Chinese AI startup’s AI model fueled a $1 trillion market wipeout, prompting U.S. regulators to tighten semiconductor restrictions.

Price Actions: NVDA stock closed lower by 5.03%, TSM -3.64%, AVGO -5.39%, ARM -7.30% on Monday.

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