Congressional scrutiny of social media companies and fears of new regulation pummeled their stocks, but other tech names could also soon be vulnerable to a new round of selling pressure if President Donald Trump goes through with new tariffs on Chinese goods.
Twitter CEO Jack Dorsey and Facebook COO Sheryl Sandberg appeared before the Senate Intelligence Committee Wednesday, testifying that they have improved their ability to thwart foreign interference with their services. Their stocks were hit Thursday for a second day, and traded lower amid a broad decline in technology.
Chips stocks were slammed Thursday, after Morgan Stanley warned about weakness in memory and KLA Tencor told investors at Citigroup’s technology conference that its December quarter would be up less than thought due to weakness in the memory market. Micron led a decline in chip stocks, losing nearly 9 percent.
But also at Citi’s conference this week, Analog Devices, off 1.5 percent, discussed weakness in industrial, possibly due to trade issues and tariffs, according to analysts. STMicroelectronics, off 1.8 percent, said at the same conference that its recent bookings were “volatile.”
The Trump administration is considering tariffs on another $200 billion in Chinese goods, after a comment period expires at midnight, and China has its own list of tariffs on $60 billion in U.S. goods.
Slowing in semiconductor equipment and chips is sometimes seen as a canary in the coal mine for global growth and tech. Analysts said it’s unclear how much is related to trade worries, but it may have some connection. Micron, Qualcomm and Intel are among companies with the most revenue exposure to China, according to Strategas.
Sources: Strategas
“I think demand has been weaker. It’s well documented that Apple’s been carrying quite a bit of inventory throughout the year. What I think is what’s going on between the U.S. and China in terms of trade has had an impact as well. It’s both demand and supply,” said Romit Shah, Nomura Instinet senior analyst on CNBC’s “Power Lunch.”
“I think the sector is very fragmented so what you’re seeing in memory today doesn’t necessarily mean it’s going to spill over into analog and wireless.”
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