The Nasdaq took a significant plunge on Wednesday driven by falling tech stocks as fears mounted over potential new restrictions on semiconductor exports to China.

The sell-off was triggered by a Bloomberg report suggesting Joe Biden administration is considering implementing sweeping regulations to further limit sales of critical chipmaking equipment to China.

The Philadelphia Semiconductor Index experienced its most substantial one-day decline since the COVID-19 pandemic, plummeting 6.8%.

One day’s trading saw $500 billion in market value from chip-related stocks wiped out. Yet, despite the setback, the index remains up 30% for the year, outperforming the broader S&P 500 index.

Why are tech stocks down?

Chipmaker giants were among the hardest hit. Nvidia, one of the world’s most valuable companies and the chipmaker at the heart of the AI revolution, saw its stock fall nearly 7%, wiping out more than $200 billion in market capitalization.

Fellow chipmakers AMD and Micron, experienced declines of 10% and 6% respectively.

ASML Holding, the Dutch chipmaking equipment provider and the world’s only producer of extreme ultraviolet lithography machines was ever worse off seeing shares plummet by 13%.

The potential crackdown is seen as an extension of the U.S. government’s efforts to protect its semiconductor industry, which it views as strategically important in the competition with China.

Washington has made significant efforts to stop or at least limit China’s access to advanced processors used for AI and high-performance computing (HPC) applications for over a year.

Adding to the market turmoil were comments made by former President Donald Trump, who is seeking re-election. Trump criticized Taiwan, a crucial hub in the global chip supply chain, stating that it should pay the United States for its defense.

“Taiwan should pay us for defense,” Trump said according to a transcript of an interview published by Bloomberg. “Taiwan took our chip business from us, I mean, how stupid are we?” he said.

This remark sent shares of Taiwan Semiconductor Manufacturing Company (TSMC) down by 8%.

The broader impact of these developments was felt across global markets. In Asia, the Nikkei 225 in Tokyo declined 0.4%, with companies like Tokyo Electron and Disco Corp experiencing significant drops. European markets also felt the pressure, with Germany’s DAX losing 0.3% and France’s CAC 40 declining 0.1%.

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