Wall Street experienced another jarring selloff on Wednesday, with all three major U.S. stock indexes taking significant hits amid fresh trade warnings and stark economic implications from the White House.

The chaos began as two prominent AI chipmakers issued dire forecasts, claiming new U.S. export controls would inflate their operational costs dramatically. The mood worsened when Federal Reserve Chairman Jerome Powell chimed in, cautioning that current tariff policies could ramp up inflation.

Nvidia revealed it anticipates a staggering $5.5 billion charge related to compliance with a recent rule from the Trump administration, aimed at limiting the use of its chips in Chinese supercomputers. The company warned that these restrictions would likely remain indefinitely.

Investors reacted swiftly, causing Nvidia's stock to tumble by 7% on Wednesday. Fellow chipmaker AMD also took a nosedive, shedding over 7% after announcing it would face an $800 million hit from the stringent export regulations affecting its MI308 GPU chip.

The bleeding extended across the tech sector, with ASML closing down 7% and Micron, Broadcom, and Marvell all suffering losses exceeding 2%.

A Grim Day for Stock Markets

The tech-heavy Nasdaq fell 3% for the day, while the S&P 500 dropped by 2.2%, and the Dow Jones Industrial Average plummeted by 1.7%, equating to a substantial 700 points.

As market players absorbed the alarming news from the chip industry, Powell’s afternoon remarks added fuel to the fire. He warned that the ongoing tariff situation could lead to a "temporary rise in inflation," with potential persistence.

Powell indicated that existing data suggests economic growth has decelerated compared to last year’s robust pace. He noted, "For the time being, we are well-positioned to wait for greater clarity before considering any adjustments to our policy stance," pushing investors to brace for the Fed keeping interest rates steady.

Nvidia’s Dilemma

Major corporations often brace for one-time charges due to anticipated earnings declines. In Nvidia’s case, the company is concerned that the new export constraints will impact its H20 processors—AI chips compliant with Biden’s tech sales regulations to China. CNBC projected these chips could generate an incredible $12 to $15 billion in revenue for 2024 alone.

This turmoil followed Nvidia's announcement just two days prior about its plans to open manufacturing facilities for AI chips in Arizona and Texas—news the White House celebrated as the "Trump Effect in action."

Once valued at nearly $3 trillion thanks to its crucial role in the booming AI industry, Nvidia has sadly become a litmus test for the market. The company's stock has slid approximately 23% this year alone amidst the escalating trade war.

This Wednesday, Nvidia's dramatic decline wiped out nearly $300 billion from its market capitalization, making it the weakest stock on the Nasdaq 100 and S&P 500.

Continual Volatility Ahead?

Wall Street has grappled with volatility over the past few weeks, particularly following Trump’s sweeping tariff announcements on April 2, which initially caused ripples of uncertainty before being temporarily dialed back.

The S&P 500 is currently down around 8% since the announcement, while the Nasdaq has lost nearly 9% and the Dow remains about 6.5% lower. With tensions rising and trade policies shifting, investors are left uncertain about what the future holds.