Why Nvidia, Broadcom, and Taiwan Semiconductor Manufacturing Are Plunging Today

Shares of many semiconductor companies, including Nvidia (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), and Taiwan Semiconductor (NYSE: TSM) tumbled again today as investors processed the potential implications of President Donald Trump's tariffs on the companies and the broader tech industry.

Nvidia's stock was down 6.1%, Broadcom slid 6.1%, and Taiwan Semiconductor (also known as TSMC) fell 5.8% as of 11:27 a.m. ET.

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While semiconductors are currently excluded from the tariffs, Trump has indicated that they may not be exempt forever. That threat, along with the potential negative effects of tariffs on technology investments, is driving these artificial intelligence (AI) stocks down today.

Image source: Getty Images.

Why semiconductor stocks are feeling the pinch

Semiconductors have been excluded so far from the latest tariff announcements, but Trump said late yesterday that tariffs on semiconductors could start "very soon." Given the extremely high tariffs that were just placed on imports from countries across the globe, investors aren't optimistic.

Earlier this year, Trump threatened to slap tariffs of at least 25% on semiconductors from Taiwan, which, of course, could drastically raise prices of the processors made by TSMC. He walked back that threat, but his recent comments have reminded investors that Trump is still willing to roll them out.

Nvidia and Broadcom don't make processors, they design the chips that go into many of the most advanced data centers, as well as in some electronics devices and electric vehicles. The concern for all of these companies is that if the price of goods rises significantly because of tariffs, then demand for their products could slow down. The Wall Street Journal reported yesterday that the overall impact of tariffs on consumer goods will have a "substantial" impact on the broader semiconductor industry.

Nvidia, Broadcom, and Taiwan Semiconductor are also dependent on large technology companies making significant investments in new tech. Spending on data centers, for example, has boosted the sales of each of these companies. But if large tech companies struggle under the weight of tariffs, they might be less willing to spend substantial sums on new projects that involve lots of expensive semiconductors.

In short, semiconductors may not evade Trump's tariffs for much longer, and even if they do, the effects of current tariffs are likely to spill over into Nvidia's, Broadcom's, and TSMC's businesses.

Where to go from here

While it's shocking to see these semiconductor stocks fall so hard in such a short time, panicking is not the right approach. Nvidia is still a leader in AI processors with an estimated 70% to 95% of the market. Similarly, no other company comes close to TSMC's chip manufacturing dominance, with the company making about 90% of the world's most advanced processors. Broadcom, for its part, benefited from its AI chip position with a 220% increase in artificial intelligence sales last year.

My point is that these companies hold impressive positions in the AI space that will not easily be overcome. Yes, their share prices are falling hard right now, and yes, there are significant uncertainties ahead.

But it's premature to abandon these stocks. The world will continue to need advanced processors for years to come. If you own shares of Nvidia, Broadcom, and Taiwan Semiconductor, it's probably best to hold onto your positions even during the market's tumultuous moves.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.