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StockBeat - Semis Sink Ahead of Nvidia Results as Trump Orders Ban on Huawei

Investing.com - Semiconductor stocks were on the back foot Thursday after President Donald Trump banned U.S. companies from using telecom infrastructure from Huawei, citing national security concerns.

The move from the White House could force chip companies like Qualcomm (NASDAQ:QCOM) to apply for U.S. export licenses to continue supplying to Huawei.

The Philadelphia Semiconductor Index slid more than 1.7%, with Micron Technology (NASDAQ:MU), Skyworks Solutions (NASDAQ:SWKS), Qorvo (NASDAQ:QRVO), and Qualcomm - all of whom count Huawei as a major customer -- fell more than 3%. Qorvo was off more than 6%.

According to the executive order, the technology that could be banned will include that which is “designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary."

The recent slump in semi stocks has been exacerbated by the return of the U.S.-China trade war at a time when the backdrop for the sector is far from constructive.

Worldwide sales of semiconductors totaled $96.8 billion during the first quarter of 2019, a 15.5% plunge over the fourth quarter and a 13% drop year on year, according to a report published by the Semiconductor Industry Association (SIA) on April 29.

The outlook is hardly encouraging, with some estimating the sector will suffer a double-digit sales decline for the year.

Traders will be keeping a watchful eye on earnings from Nvidia (NASDAQ:NVDA) and Applied Materials (NASDAQ:AMAT) after the bell to gauge whether the gloomy outlook on the sector is overdone.

Bucking the trend, however, Cisco Systems (NASDAQ:CSCO) racked up gains after delivering first-quarter results that beat on the bottom and top lines. The networking company revealed upbeat revenue guidance to send its share price soaring around 7%. That made Cisco the top performer among the stocks in the Nasdaq-100 Index and the Dow Jones Industrial Average on Thursday.

Cisco's service provider segment was weaker than expected, dropping 13%, mostly due to "soft demand in the Americas, but we are confident demand will recover closer to 2020," CFRA said in a note.

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