US stock markets traded mixed on Wednesday, with major technology stocks suffering a sustained decline on heightened geopolitical tensions.

Technology stocks fell sharply

Wall Street’s major indices traded lower on Wednesday, losing ground from record levels, with the technology sector leading the losses on the back of a Bloomberg report that President Biden’s administration is considering taking tough measures against companies that export critical chip-making equipment to China.

In addition, Republican presidential candidate Donald Trump raised geopolitical tensions by arguing that Taiwan will have to pay the US to supply its defense equipment because it gives it nothing, causing Taiwan Semiconductor Manufacturing (TSM), Taiwan’s biggest stock and the world’s largest contract chipmaker, to plunge sharply before the open of trading.

Trump made the remarks in an interview with Bloomberg Businessweek late on Tuesday.

Dutch lithography equipment maker ASML (ASML) stocks also plunged in European trading despite a strong second quarter, with about half of its sales coming from China, underscoring the sharp drop in the event of tighter restrictions.

AI fervor was one of the main drivers of Wall Street’s rally over the past year, with tech stocks such as NVIDIA (NVDA) leading a significant rise in valuations. A decline in confidence in these stocks could lead to a substantial revision in valuations.

Earnings season continues

The earnings season continued on Wednesday.

Johnson & Johnson (JNJ) shares advanced 2.5% as the healthcare giant posted strong second-quarter results, where both earnings and revenue beat Wall Street forecasts, thanks to strong sales of its drugs.

Spirit Airlines (SAVE) shares were down more than 8% after the airline lowered its second-quarter revenue estimates, citing lower-than-expected non-ticket revenue.

JB Hunt (JBHT) stocks were down 5% after the company announced a 24% drop in second-quarter profit, as well as a 7% decline in total operating revenue.

Stocks of Five Below (FIVE) tumbled 15% after the discount retailer announced the resignation of its CEO, Joel Anderson, and reported second-quarter results below expectations.

Oil rises on lower US inventories

Oil prices rose on Wednesday as signs of shrinking US supplies helped calm some fears about weakening demand in the rest of the world, and China in particular.

US crude inventories fell by 4.4 million barrels the previous week, far more than expected, according to data from the American Petroleum Institute, indicating a tight market in the world’s largest oil producer and consumer.

The US Energy Information Administration will release its official storage report later in the session.

Crude oil markets fell sharply last week as weak economic data from China, the world’s largest oil importer, heightened concerns about slowing demand.