Taiwan Semiconductor Manufacturing (TSM -0.90%) stock is losing ground again in Tuesday's trading. The chip foundry leader's share price was down 0.4% as of 2 p.m. ET amid the backdrop of a 0.1% gain for both the S&P 500 and the Nasdaq Composite. Notably, the stock had been up as much as 4.3% earlier in the session.

TSMC initially rose today thanks to investor hopes for relief on tariffs, but broader-market sentiment turned negative again as the day progressed and has dragged its share price lower. The stock is also being negatively impacted by news that the company could face a significant penalty for connections to a major Chinese tech company.

TSMC stock slips as tariff hopes fade

Reports that the U.S. had commenced tariff negotiations with Japan and other countries powered big rebound momentum for stocks early in today's trading, but the gains haven't held. Investors appear to have seized on this morning's rally as an opportunity to sell out of stocks due to concerns that more volatility is on the horizon. The Trump administration's tariff policies have had a disruptive impact on equity markets, and there's still plenty of uncertainty for investors to contend with.

Is TSMC about to be hit with a big fine?

Reuters published a report today stating that TSMC could be fined $1 billion or more in order to resolve a probe involving a chip it produced that was included in an artificial intelligence (AI) processor manufactured by Chinese tech giant Huawei. The U.S. has placed export restrictions on AI chips and semiconductor manufacturing that are intended to prevent them from being sold to China. TSMC's advanced chip foundry technologies rely on some technologies that originated in the U.S., and the company is barred from producing semiconductors for Huawei as a result.