Although many analysts are still discussing the full impact of the intensification of the trade war between the United States and China, this dispute is already taking its toll on some of the largest technology companies in the US
And with both sides hardening their views with each passing day, the chance of a short-term resolution of this dispute between & # 39; the world's two largest economies is rapidly blurring. If this uncertain environment continues or takes an uglier turn, investors must be ready to adjust their portfolios and shorten risky assets. Here are three major technology stocks whose fate is closely linked to China:
1. Apple
The brand of iPhone, Apple Inc. (NASDAQ :), has a huge share in this fight and the performance of its shares in the last month reflects that threat. His stock has so far fallen by around 13% since US President Donald Trump announced that rates for importing Chinese products would be increased from 25% to 25%, leading China to take revenge. The shares closed 1.7% yesterday, at $ 179.66.
China is Apple's third largest market and has nearly $ 52 billion in sales within the company's last fiscal year. Concerns about the impact of the trade war on Apple became more intense after the American Huawei Technologies Co. Blacklisted last week, raising fears that China will retaliate by targeting Apple and its supply chain
China & # 39; s Department of Commerce said yesterday that actions in the US have increased the risk of a trade war, as well as a global economic recession, and warned that Beijing will take all necessary steps to protect the interests of Chinese companies.
Goldman Sachs presents a worst-case scenario, warning investors yesterday that Apple's profit would get a 29% reputation if China would take revenge against the US with a ban on selling the iPhone maker's products .
In our opinion, that scenario is highly unlikely in view of Apple's huge investment in China and its impact on the local economy. But Apple shares will certainly see more weakness if this dispute persists. Investors should wait for a better entry to buy shares from Apple, which is a good investment for investors in buy-and-hold.
That moment may come in June when President Trump and Chinese leader Xi Jinping are expected to meet at the G20 economic summit in Japan.
2. Tesla
Although the electric car manufacturer, Tesla Inc. (NASDAQ :), having been an extremely risky game in recent months, Wall Street analysts have become more bearish about their future since trade conflicts between the US and China have increased.
Morgan Stanley analyst Adam Jonas said in a letter this week that, in the worst case, Tesla's stock, which closed at $ 195.49 yesterday, could fall to as much as $ 10. The trade dispute has increased risk for Tesla's demand forecasts from China, which the company hopes to generate around $ 9 billion in revenue between 2020 and 2024.
But that target will be too ambitious if Beijing takes revenge with retaliation rates or restrictions. Such a measure could cut Tesla's sales from China in two and save more than $ 16.4 billion in market value, according to Jonas estimates
In response to these negative comments, investors have dumped Tesla shares, which have lost more than a quarter of their value in the last month. Regardless of the Chinese risk, Tesla is a very speculative stock market, given the declining demand for Model 3, and the company's precarious level of cash. World Trade Risks have contributed to highlighting these vulnerabilities, in our opinion
3. Qualcomm
Companies that produce chips for smartphones, game products and data centers are most exposed to the Chinese risk. The US produced about half of the $ 470 billion in chips sold worldwide last year, and China was the largest market.
That is why the entire semiconductor sector has been suffering since the escalation of commercial enemies. A company that is likely to suffer the most is Qualcomm Inc. (NASDAQ :). The chip maker based in San Diego received two-thirds of its sales from China in the last fiscal year.
Qualcomm mainly designs its chips in the United States, but has them produced via its web of subcontractors in Taiwan, Korea and China. These chips find their way back to China, where they are installed in electronic gadgets such as smartphones.
Trading with $ 64.40, QCOM share has lost about 20% of its value in the last month. Most of the stock damage came on Wednesday after a US district judge agreed to the Federal Trade Commission in a case where the company was accused of anti-competitive practices. That, in combination with the company's exposure to China, makes its inventory extremely vulnerable to further disadvantages.
