US markets fall as AI chipmakers mourn restrictions on China exports

US stock markets suffered more significant losses on Wednesday, with stocks in leading AI chipmakers slumping after firms said new restrictions on exports to China would cost them billions.

Nvidia fell 6.87% - and was at one point down 10% - after revealing it would now need a US government licence to sell its H20 chip. Rival chipmaker AMD slumped 7.35% after it predicted a $800m (£604m) charge due to its MI308 also needing a licence.

Dutch firm ASML, which makes hardware essential to chip manufacturing, fell more than 5% after it missed order expectations and said US tariffs created uncertainty. The losses filtered into the tech-dominated Nasdaq index, which recovered slightly to end 3% down, while the larger S&P 500 fell 2.2%.

Such losses would have been among the worst in years were it not for the turmoil over recent weeks. It comes as China remains the focus of Donald Trump's tariff regime, with both countries imposing tit-for-tat charges of over 100% on imports.

The US commerce department said in a statement it was "committed to acting on the president's directive to safeguard our national and economic security". Nvidia's bespoke China chip is already deliberately less powerful than products sold elsewhere after intervention from the previous Biden administration.

However, the Trump government is worried the H20 and others could still be used to build a supercomputer in China, threatening national security and US dominance in AI. Nvidia said the move would cost it around $5.5bn (£4.1bn) and the licensing requirement would be in place for the "indefinite future".

Nvidia's recently announced a $500bn (£378bn) investment to build infrastructure in America - something Mr Trump heralded as a victory in his mission to boost US manufacturing. However, it appears to have been too little to stave off the new restrictions.

Pressure has also come from the Democrats, with senator Elizabeth Warren writing to the commerce secretary and urging him to limit chip sales to China. Meanwhile, the head of US central bank also warned on Wednesday that US tariffs could slow the economy and raise inflation more than expected.

Jerome Powell said the bank would need more time to decide on lowering interest rates. "The level of the tariff increases announced so far is significantly larger than anticipated," he said.

"The same is likely to be true of the economic effects, which will include higher inflation and slower growth." Predictions of a recession in the US have risen significantly since the president revealed details of the import taxes a few weeks ago. However, he subsequently paused the higher rates for 90 days to allow for negotiations..