“A risk for technology companies is that the trend continues, and China retaliates with moves that make it more difficult for U.S. companies to operate in China," Rob Anderson, investment research analyst at Ned Davis Research, wrote in a note Thursday. “For now, we maintain our market weight recommendation on the sector … We will take our cue from our sector model and monitor the trade situation. We may downgrade the sector to underweight if the trade war causes the overall economy to slow and weakness spreads into software spending."
“The government is acting very quickly this time to support the domestic high-technology industry after Huawei was targeted in the rising trade tension,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “The megatrend is that China will have to develop its own chips and software on a large scale to reduce its reliance on the US. We’ll see other support measures and that’s big positive news for China’s technology sector in the long turn.”
As a leader in cost, technology and innovative areas like 5G, it would be “very difficult for Huawei’s competitors to totally regain market share in this segment,” UBS analyst Sundeep Gantori said.
“Given the company’s broader contribution to industry innovation, the restrictions would likely slow down overall progress of such technologies.”
Apple Inc. (AAPL)
But Ives doesn’t view additional tariffs on Apple as particularly realistic, and he also notes CEO Tim Cook’s track record of mitigating tariffs. “To this point, we continue to strongly believe that for a company that employees over 1 million Chinese workers with its flagship Foxconn factory and is a major strategic player within the China technology ecosystem that from a supply chain perspective Apple will not have major roadblocks ahead despite the loud noise," Ives said. “Taking a step back, we ultimately believe there is a low likelihood that Apple and its iPhones feel the brunt of the tariffs given its strategic importance domestically as well as Cook’s ability to navigate these issues in the past with Trump and K Street."
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