The "Eye of the Storm" in the Trade War: American Tech Stocks

As Trump insists on pushing forward with a new round of tariff wars, U.S. tech stocks have become the biggest victims.

Paul Nolte, market strategist and senior wealth manager at Murphy & Sylvest Wealth Management, stated that given the high valuations of tech companies and the expected impact of tariffs on profits, it would not be surprising if some tech stocks fell another 50%. In the event of an economic recession, analysts expect chip stocks could drop at least another 20%.

"If we see weaker economic data, this sell-off could continue for a while," Nolte said:

"We have not seen any signs of negotiation or signals of when this crisis will end."

Trump's Tariffs Will Further Burden Tech Stocks

Last week, the Nasdaq 100 index experienced its worst week since 2020, and tech stocks have lagged behind all other sectors of the S&P 500 over the past month and a half. Trump's tariffs hit hardest those groups in the supply chain that rely on overseas manufacturing, such as semiconductor and hardware manufacturers.

The semiconductor manufacturer index fell 16% last week, while Dell Technologies dropped 22%.

Citigroup analyst Christopher Danely's team wrote in a research report last week that if tariffs continue for even just one month, the semiconductor supply chain is likely to "freeze" due to uncertainty and reduced order rates. In the event of an economic recession, analysts expect chip stocks could drop at least another 20%.

Due to the length and geographical diversity of the semiconductor supply chain, the impact of tariffs is "almost impossible to fully assess."

Apple Cannot Escape Tariff Impact

Notably, Apple has been working to diversify its supply chain since Trump's first presidential term, but this may not protect the company during this tariff hit. Rosenblatt analyst Barton Crockett estimates that the iPhone manufacturer could face about $40 billion in tariff-related costs, which, if not passed on to customers, would wipe out nearly one-third of its profits.

Howard Chan, CEO of Kurv Investment Management, stated that due to tariffs and potentially declining consumer demand, he can easily foresee Apple dropping another 10%. In the worst-case scenario, if Apple cannot obtain exemptions similar to those during the previous trade war under Trump, Chan believes the outcome is unpredictable. Chan said:

"We could face a situation where everything goes wrong, and determining the bottom in such a case is extremely difficult."

Even after the drop in the Nasdaq 100 index, the valuation of this benchmark remains high. The index currently has a price-to-earnings ratio of 28 times, while the average over the past decade has been 25 times. iCapital Chief Investment Strategist Anastasia Amoroso stated:

"Tech stocks are understandably at the center of the storm. They are not only the most affected in terms of the proportion of imported goods, but also the most exposed in terms of revenue generated outside the United States. Investors find it difficult to incorporate these factors into earnings expectations and outlooks, which is why they should continue to face pressure."