Call it a secondary effect of the U.S.-China trade war but it’s still clearly taking a bite out of the shares of U.S. chip makers today.
Last week the Trump administration added sanctions on China’s Huawei Technologies that would prevent the company from buying U.S. technology products without a special waiver.
Today several key chip suppliers and Alphabet (GOOG) have reportedly cut off Huawei from purchasing their products. The bigger blows to the Chinese telecom gear maker come from Qualcomm (QCOMWealth Strength IndexQCOM is Moderately Flat and trending Down) and Broadcom (AVGOWealth Strength IndexAVGO is Moderately Flat and trending Down), makers of key wireless phone components including model chips, and Alphabet (GOOG), which has suspended sales to Huawei of its Android operating system, leaving the company with access only to the open-source version of Android and exposed to a raft of potential compatibility problems.
The sales cut off has hit U.S. technology shares hard today. As of the close in New York today, May 20, shares of Xilinx (XLNXWealth Strength IndexXLNX is Extremely Flat and trending Down) were down 3.56%; Qualcomm was off 5.99%; Broadcom was lower by 5.97%, STMicroelctronics (STM) had plunged 8.43%, and Micron Technology (MUWealth Strength IndexMU is Extremely Down and trending Down) was down 3.99%. The pattern recently has been that when Huawei stumbles, competitors Nokia (NOK) and Ericsson (ERIC) move up. That’s true today with the two up 2.83% and 2.13%, respectively.
The troubles with technology have made the NASDAQ Composite the worst performing major U.S. index as of the close in New York. The NASDAQ was down 1.46%, while the Standard & Poor’s 500 was down 0.67% and the Dow Jones Industrial Average was lower by 0.33%. The small cap Russell 2000, which has been falling ahead of the other indexes recently, is today holding up relatively well with a retreat of 0.70%.