If imposition of a respective 25% and 10% tariff on steel and aluminum imports was not enough, President Trump is reportedly going to levy new tariffs worth up to $60 billion on China, targeting mainly the country’s telecom and technology sector. The Trump administration is also reportedly mulling over “imposing investment restrictions on Chinese companies over and above the heightened national security restrictions.”
Meanwhile, the threat of a trade war has been looming large since the start of the month. Already, the European Union (EU) has threatened the United States with a tit-for-tat tariff on a range of consumer, agricultural and steel products. Now China could be the next in line to levy a retaliatory tariff (read: Trade War Talks Heat Up: ETFs & Stocks in Focus).
The relationship between the United States and China has been in the spotlight since Trump’s election win in November 2016, as evident from the volley of verbal attacks made by Trump against China’s trade practices. Investors should note that China stocks fell into the questionable spot after Donald Trump’s win in 2016. This is because Trump was expected to take stricter steps on outsourcing, on which China is hugely dependent.
Naturally, companies that have extensive trade relations with China would be at high risk of falling prey to trade war. In fact, Goldman Sachs has compiled a list of companies some companies with considerable revenue exposure to China. Per the source, technology chip suppliers selling their products to manufacturers in China are likely to be hit hard.
Which Large-Cap Companies Are At Risk on Likely Tariffs
We highlight a few tech companies (according to Goldman Sachs’ study) that have high sales exposure to China.
Skyworks Solutions Inc (SWKS - Free Report)
The company, which makes highly innovative analog semiconductors, has 85% revenue exposure to China, per Goldman, quoted on CNBC.
Qualcomm (QCOM - Free Report)
The leader in 3G, 4G and next-generation wireless technologies is dependent on China with 69% exposure.
NVIDIA Corp (NVDA - Free Report)
This semiconductor company’s sales exposure to China is 56%
Some other tech and semiconductor companies, which have sales exposure to China in the range of 22% to 55%, include the likes of Intel Corporation, Micron Technology Inc., Applied Materials Inc., Lam Research, Apple and Amphenol Corporation.
Time for Small-Cap Tech Stocks?
While these large-cap stocks may get hurt by the possible trade war, investors can take a look at small-cap technology stocks, which are more domestically focused and thus less vulnerable to souring trade relations.
The following tech stocks have market cap of less than 1 billion.
Xplore Technologies Corp
This Zacks Rank #2 (Buy) company is in the business of developing integrating and marketing mobile wireless Tablet PC computing systems. It belongs to a top-ranked Zacks Industry (top 30%).
Super Micro Computer Inc. (SMCI - Free Report)
This Zacks Rank #1 (Strong Buy) company manufactures and sells energy-efficient, application optimized server solutions based on the x86 architecture. It hails from a top-ranked Zacks Industry (top 19%).
Electro Scientific Industries Inc.
This Zacks Rank #1 company manufactures products used around the world in electronics manufacturing. It hails from a top-ranked Zacks Industry (top 19%). You can see the complete list of today’s Zacks #1 Rank stocks here.
This Zacks Rank #1 company is a technology services and solutions company. It belongs to a top-ranked Zacks Industry (top 36%).
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