Shares of Broadcom (AVGO 0.58%), a semiconductor designer, are falling Monday as investors grow increasingly concerned about President Donald Trump's tariffs and economic decisions.
On Monday, Trump again called on Federal Reserve Chairman Jerome Powell to lower interest rates. The Fed operates independently from the White House and the rest of the federal government, but Trump has ratcheted up his expressions of displeasure with Powell, and presidential aides are reportedly looking for ways that the administration might be able to fire Powell legally before his term as chairman is up in 2026. However, as Washington-focused news website The Hill pointed out on Friday: "A 90-year-old Supreme Court precedent likely protects Powell from being fired by the president for anything other than misconduct or severe neglect of office."
Investors are concerned that if the Fed were to lose its independence, it would lead to turmoil in the markets and the economy. They're also concerned about reports that the administration is still considering additional tariffs on semiconductors.
As a result, Broadcom's stock was trading down by 4.4% as of 12:55 p.m. ET.
Some investors are losing their appetite for the chip stock
Broadcom's share price is down by nearly 30% since the beginning of this year, and much of that drop came after Trump announced his tariffs. While Broadcom is based in the U.S., many of its chips are made in Taiwan by Taiwan Semiconductor Manufacturing.
NASDAQ: AVGO
Key Data Points
Trump's current tariffs don't apply to semiconductor companies, but his team is looking into how he might impose chip tariffs, and Trump said earlier this month that such tariffs were "coming soon." As investors brace for the implications, many are losing their taste for Broadcom's stock.
That sentiment was made worse Monday as Trump pressured the Fed chair on social media to cut interest rates. The Fed has in recent months held its benchmark federal funds rates steady as it evaluates current inflation levels and waits to see how the trade war will impact the economy. Investors remain concerned that Trump will attempt to remove Powell.
However, an attempt to fire Powell could shake the market and the economy. As Evercore ISI Vice President Krishna Guha told CNBC during an interview on Monday, "If you actually did try to remove the Federal Reserve chairman, I think you would see a severe reaction in markets with yields higher, dollars lower, and equities selling off."
A wait-and-see approach isn't a bad idea
With so much up in the air with potential semiconductor tariffs and the economy right now, it's probably best for investors to take a wait-and-see approach. Broadcom's processors are helping to power the artificial intelligence boom, but short-term pain for the company could be ahead as its customers respond to the current uncertainties.
Over the long term, Broadcom could still be a good investment, but investors who are eager to buy the stock may want to factor in the possibility that a recession or economic slowdown could result in large tech companies cutting their near-term spending on semiconductors.
