The U.S.-China trade war has been a major concern since mid-2018. Both countries have been imposing billions of dollars of tariffs on each other. This has impacted American tech stocks mostly due to their high exposure to China.
However, after several ups and downs, it seems that the phase one deal is coming soon thanks to positive comments from both China and President Donald Trump. In case this happens, tech stocks are sure to gain.
Phase One Deal in Making
The United States had scheduled 15% tariff on consumer goods worth $156 billion from China on Dec 15. And the market turned highly volatile on Dec 3 after President Trump said that a trade deal with China is unlikely before the 2020 U.S. elections. But the very next day, a Bloomberg report indicated that a partial trade deal would be completed before Dec 15.
Some communication on Dec 5, eased tensions. Beijing said, “China’s trade negotiations with the United States remain on track”, offering official assurance. Additionally, on the same day, Trump said that the U.S.-China trade talks are “moving right along.” He also clarified that “on December 15th, something could happen but we are not discussing that yet. We are having very good discussions with China, however.”
Tech Stocks Climb North
The report on trade talk progress not only snapped Wall Streets’ three-day losing streak, but also indicated that both the United States and China are closer on agreeing on how much tariffs would be rolled back in a “phase one” trade deal.
Evidently, a rise in tariff increases the price of U.S. goods sold to other countries. In this case, an additional 15% tariff means that Chinese consumers will have to pay extra for American products. The technology sector that is highly exposed to China has been bearing the brunt of a protracted trade war. Tech giants like Apple had to suffer revenue loss as increased tariffs hiked the price of iPhones and other devices.
Semiconductor and chip stocks like Texas Instruments and Nvidia had seen stocks declining by nearly 5% in a single day due to tariff war. Chip manufacturers generate more than 50% of their revenues from China. So, higher tariffs have them looking for new customers as finished goods keep piling up.
Nonetheless, with positive developments on the trade front, the Technology Select Sector SPDR Fund (XLK) closed 0.4% higher on Dec 5, while the iShares PHLX Semiconductor ETF (SOXX) rose 0.5%.
Grab These Stocks Now
Given the positive developments on the trade front, if a U.S.-China phase one trade deal comes through, the tech space is sure to boom. We have shortlisted five stocks that flaunt a Zacks Rank # 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Cirrus Logic, Inc. CRUS develops, manufactures and markets analog, mixed-signal and audio DSP integrated circuits. The company’s expected earnings growth rate for the current year is 28.4% compared with the Zacks Electronics - Semiconductors industry’s projected earnings growth of 2.3%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 21.5% over the past 60 days. Cirrus Logic has outperformed the industry in the past year (+89.8% versus +42.9%).
Ubiquiti Inc. UI develops networking technology for service providers, enterprises and consumers worldwide. The company’s expected earnings growth rate for the current year is 21.4% compared with the Zacks Wireless Equipment industry’s projected earnings growth of 10%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 4.9% over the past 60 days. Ubiquiti has outperformed the industry in the past year (+77.3% versus +10.7%).
QUALCOMM Incorporated QCOM designs, develops, manufactures and markets digital communication products. The company’s expected earnings growth rate for the current year is 16.4% compared with the Wireless Equipmentindustry’s projected earnings growth of 10%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 3.5% over the past 60 days. QUALCOMM has outperformed the industry in the past year (+44.6% versus +10.6%).
Transcat, Inc. TRNS provides calibration and laboratory instrument services. The company offers calibration, repair, inspection, analytical qualification, preventative maintenance, consulting, and other related services. The company’s expected earnings growth rate for the current quarter is 23.8% against the Zacks Instruments - Control industry’s projected earnings decline of 23.8%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 18.5% over the past 60 days. Transcat has outperformed the industry in the past year (+61.7% versus +26.2%).
Anaplan, Inc. PLAN provides a cloud-based connected planning platform. Its platform is used to unite disconnected database structures, including relational, columnar, and online analytical processing with in-memory data storage.
The company’s expected earnings growth rate for the current quarter is 15.4% against the Zacks Internet - Software industry’s projected earnings decline of more than 100%. The Zacks Consensus Estimate for the company’s current-year earnings has advanced 7.7% over the past 60 days. Anaplan has outperformed the industry in the past year (+82.8% versus +11.6%).
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