Apple Inc. and major semiconductor companies including Micron Technology Inc. and Texas Instruments Inc. fell on Monday after tweets by President Donald Trump appeared to escalate a trade standoff between the U.S. and China.
While U.S. stock indexes were broadly lower on the news, technology shares were among the worst performers. The sector has a heavy correlation to trade issues, in part because the companies rely on China for their supply chains, and because they derive a hefty portion of their revenue from the country.
“Tech stocks are ultimately caught in the cross fire, with Apple and the semiconductor space remaining front and center,” wrote Daniel Ives, an analyst at Wedbush. The prospect of additional tariffs “remains the biggest risk for tech stocks over the coming months as fundamentals continue to generally track in the right direction,” he wrote.
The S&P 500 Information Technology Index fell 2.5 percent in early trading. The Philadelphia Semiconductor Index was down as much as 3.7 percent. Both were on track for their biggest one-day percentage declines since January.
Among major companies, Apple sank as much as 3.9 percent while Micron lost 5.4 percent and Texas Instruments was down 3.4 percent. Nvidia Corp. shed 4.9 percent.
According to data compiled by Bloomberg, Apple derived 19.6 percent of its fiscal 2018 revenue from China, while the country accounted for more than 44 percent of Texas Instruments’ revenue last year and 57 percent of Micron’s.
“The last thing Apple and the semi space needs right now is a gut punch on the U.S./China front,” Ives wrote in a research note Monday.
Apple shares rallied last week, after its latest quarterly report reassured investors about the level of demand it was seeing in China for its iPhone. The latest developments may threaten that, according to Lynx Equity Strategies.
“Given the break-down in U.S.-China trade talks over the weekend, could the improving iPhone trajectory turn back around and place June guidance at risk?” wrote analysts KC Rajkumar and Jahanara Nissar. “We think it would be too early to buy the dips over the week, even if fast-moving trade-related headlines were to reverse.”
