Chip stocks dropped sharply on Monday after new developments in China sparked fresh worries about competition. Shares of Sandisk, ASML Holding, and many other semiconductor companies declined.
Two main events caused the selloff: a major Chinese IPO in the memory chip sector and news that a state-backed Chinese company has started mass-producing chip manufacturing equipment.
Sandisk fell 12%, making it the biggest loser in the S&P 500. Western Digital dropped 7%, Marvell, which makes chips and networking products, lost nearly 5%, and Advanced Micro Devices was down 8%. Intel and Super Micro Computer also lost ground, each falling about 3% to 4%.
The first trigger was the Shanghai stock market debut of Chinese memory chipmaker ChangXin Memory Technologies, or CXMT. Its shares jumped 466% on the first day, giving the company a market value of $484 billion.
A bigger hit to market sentiment came from reports that a Chinese company has started making immersion deep ultraviolet lithography machines, which are essential for chip manufacturing. Industry and financial media were the first to report this news.
ASML, which makes this type of equipment, dropped 6.2% after the news. Other chip equipment makers also fell: KLA Corp. was down 6%, Lam Research lost 8.2%, and Applied Materials dropped 7%.
