Semiconductor stocks are known to be far more sensitive than other industries to developments in China and the recent trade war between the U.S. and China has caught many of these companies in a bad position.
It’s no surprise that after the G20 meeting in Japan which saw President Trump announce the beginning of a new round of trade talks with China, stocks for semiconductor companies have been surging.
Although the current tariffs between both countries remain in place, the agreement to restart trade talks once again has helped the sector significantly. Additionally, the U.S. might be lifting some export restrictions on suppliers doing business with Chinese telecom giant Huawei, which was singled out as the target of a U.S. ban back in May.
“It may be that Trump’s statement, to the extent it carries any real weight (we may just be getting jaded but we have seen this before) may just indicate more willingness to be a bit more liberal in granting export licenses for specific products where national security impact is deemed minimal,” wrote Bernstein semiconductor analyst Stacy Rasgon in a report on Monday according to Barrons. “…it remains unclear if anything has really changed as there are already mechanisms by which (uncontrolled) products can be sold to Huawei.”
Overall, semiconductor stocks jumped on Monday. One of the biggest winners in the sector was Broadcom (NASDAQ: AVGO), whose shares jumped 5.2 percent over the course of Monday’s trading session. Shares have fallen by over 20 percent in May after the Huawei situation escalated, with the Chinese telecom giant being Broadcom’s largest customer.
Other semiconductor stocks include Qualcomm (NASDAQ: QCOM), Texas Instruments (NASDAQ: TXN), NXP Semiconductors (NASDAQ: NXP), Xilinx (NASDAQ: XLNX), and Advanced Micro Devices (NASDAQ: AMD), which were all up 2.3 percent, 2.6 percent, 3.6 percent, 2.7 percent, and 3.9 percent respectively.
Additionally, smaller companies in the sector that provide components to Huawei also saw their shares spike in response to the good news from the G20 summit. Microchip Technology (NASDAQ: MCHP) falls into this camp, having increased by 5.2 percent in Monday, which many others rose up by even more.
While markets are now optimistic, it will likely take some time for any sort of trade agreement to get finalized, if it will even succeed at all in the first place. With the relative unlikeliness of this happening anytime soon, investors could see these gains subside over the next few trading sessions as markets readjust to this reality.
Broadcom Company Profile
Broadcom–the combined entity of Broadcom and Avago–boasts a highly diverse product portfolio across an array of end markets. Avago focused primarily on radio frequency filters and amplifiers used in high-end smartphones, such as the Apple iPhone and Samsung Galaxy devices, in addition to an assortment of solutions for wired infrastructure, enterprise storage, and industrial end markets.
Legacy Broadcom targeted networking semiconductors, such as switch and physical layer chips, broadband products (such as television set-top box processors), and connectivity chips that handle standards such as Wi-Fi and Bluetooth. The company recently acquired Brocade and CA Technologies to bolster its offerings in enterprise storage and mainframe software, respectively. – Warrior Trading News
