Although many analysts still debate the full impact of the intensifying trade war between the United States and China, this dispute is already taking its toll on some of the largest technology companies in the United States
And with both sides hardening their positions with every single day falls The chances of a near-term resolution of this dispute between the world's two largest economies are fast. If this precarious environment persists or takes a halter, investors should be prepared to adjust their portfolios and trim risky assets. Here are three major technology stores whose fate is closely related to China:
iPhone, Apple Inc. (NASDAQ :), has a lot of effort in this fight, and the performance of its shares in the last month reflects this threat. Its stock has so far fallen approx. 1
China is Apple's third largest market, bringing nearly $ 52 billion in sales in its recent fiscal year. Concerns about the impact of the commercial war on Apple intensified after the US blacklisted by Huawei Technologies Co. last week, fearing that China will return by targeting Apple and its supply chain.
China's Ministry of Commerce said yesterday that US actions have increased the risk of a trade war as well as a global economic recession and warned that Beijing will take any steps necessary to protect the interests of Chinese companies.
In a worst-case scenario, Goldman Sach's investors warned yesterday that Apple's earnings would hit a 29% hit if China were to return to the US with a ban on selling iPhone manufacturer's products.
In our opinion, this scenario is very unlikely since Apple's major investment in China and its impact on the local economy. But the Apple file will certainly see more weakness if this dispute lands. Investors should wait for a better place to buy Apple shares, which is a good investment for invest-and-hold investors.
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.
Although the electric car manufacturer, Tesla Inc. (NASDAQ :), has been an extremely risky game in recent months, Wall Street analysts have become more vicious about their future since the US-China trade ranks intensified.
Morgan Stanley analyst Adam Jonas said in a note this week that the Tesla stock, which closed yesterday at $ 195.49, could fall to as low as $ 10 in the worst case scenario. The trade conflict has increased the risk of Tesla's demand forecasts from China, from which the company hopes to generate about $ 9 billion in revenue between 2020 and 2024.
But this goal will be too ambitious if Beijing is retaliated with reprisals or restrictions . Such a measure can cut Tesla's sales from China by half and cut more than $ 16.4 billion. USD in market value, according to Jonas estimates.
Responding to these Negative Comments, investors have dumped Tesla shares, which have lost more than a quarter of their value over the past month. Regardless of China, Tesla risks a highly speculative stock given the weakened demand for Model 3 and its uncertain level of cash. Global trade risks have contributed to highlighting these vulnerabilities in our opinion.
Companies that produce chips for smartphones, gaming products and data centers are the most vulnerable to China risk. The United States produced about half of the $ 470 billion chips sold globally last year, and China was the largest market.
Therefore, the entire semiconductor industry has suffered since the escalation of the commercial hostilities. A company that is likely to suffer the most is Qualcomm Inc. (NASDAQ :). The San Diego-based chipmaker received two-thirds of its sales from China in the last financial year.
Qualcomm mostly manufactures its chips in the United States, but makes them manufactured through its web of subcontractors in Taiwan, Korea and China. These chips then find their way back to China, where they are installed in electronic gadgets, such as smartphones.
Trading at $ 64.40 QCOM stock has lost about 20% of its value over the past month. Most of the damage to the warehouse came Wednesday after an American district judge agreed with the Federal Trade Commission in a case that accused the company of anti-competitive practices. This, combined with the company's exposure in China, makes its stock extremely vulnerable to further downside.