Home Markets Chip Stocks Slip After US Ban on Huawei

Chip Stocks Slip After US Ban on Huawei


Stocks plummet on Monday as the US-China trading tension continues, with the United States barring the sharing of technology with China’s biggest phone manufacturer Huawei Technologies Inc.   

US stock market index Dow Jones Industrial Average dropped to 25,679.90 or by 84.1 points as Apple fell behind. The 30 large and publicly owned US companies included in the stock index fell as much as 203 points. The S&P 500 moderately dropped by 0.7% to 2,840.23, with its tech sector falling by 1.8%. The Nasdaq Composite also decreased by 1.46% to 7,702.38.

Alphabet-owned Google has terminated its business relations with Huawei in terms of transferring software, hardware, and other related services. This decision was made after US President Donald Trump released an order to prohibit the use of equipment manufactured by companies that pose a threat to US national security – Huawei is included in the list. US companies need to acquire a license first before they can conduct a business with the Chinese telecommunications giant.

As a result, Huawei began to lose its US business deals. According to Bloomberg News, Qualcomm, Intel, and Broadcom have reportedly ended its ties with the Chinese company. They will no longer supply Huawei for the meantime until an announcement has made.

Moreover, the chipmaker stocks suffered a lot. Advanced Micro Devices and Nvidia both went down about 3%. Lam Research fell by 5.4%. Qualcomm dropped 6%, and Micron Technology shares fell by 4%. Telecom supplies Lumentum Holdings plummeted more than 4% during its cut on quarterly guidance.

After an analyst from HSBC slashed its Huawei’s price target, Apple also lagged falling more than 3%. The analyst mentioned his uneasiness for the target cut because of the current US-China trade war.

The US and China tried to settle a deal to put an end to this ongoing trading tensions. Earlier this month, President Trump ordered a 10-25% increase for Chinese imports worth around $200B. China, however,  retaliated Trump’s tariffs hikes by increasing levies on US imports worth around $60 billion.

On Friday, CNBC reported that the talks to settle the US-China trade tension has stopped making progress. According to CNBC’s sources, the scheduled discussions did not happen as the US continued to pressure Chinese telecommunication companies.  In China, on the other hand, the state media said that the government is in no particular hurry to resume its trade discussions with the US.

Market trades have suffered a lot this month. The S&P fell 3.6%, while the Dow lost 3.4 % and Nasdaq dropped 4.95%.