Trump's 'Liberation Day' Tariffs Loom: Analyst Flags 2 Key Risks For Tech Sector Amid Skittish Retail Sentiment
Ives said the uncertainty around tariffs could create caution about broader spending and greenlighting artificial intelligence (AI) projects across all industries.
After a volatile first quarter, the market has started the second quarter on a reasonably positive note. On Tuesday, Wedbush's tech analyst Daniel Ives flagged two significant risks the tech sector faces amid President Donald Trump's tariff rhetoric.
Ives said that the uncertainty around tariffs could create caution about broader spending and greenlighting artificial intelligence (AI) projects across all industries.
Latest Videos
The analyst sees tech companies slowing down spending, especially on AI projects, amid the anticipated slowdown in the economy and higher prices.
According to Ives, the negative stock reaction is due to fears that the Trump tariffs could change the growth trajectory of AI spending in the near term.
He added that as consumers pay for tariffs, consumer spending and confidence are further dented, exerting downward pressure on enterprise spending, investing, and ad digital dollars.
Secondly, the analyst said China is the biggest variable for U.S. tech companies, the overall supply chain for chips, and the AI revolution. He sees Beijing mulling retaliatory actions.
Ives noted that the semiconductor industry is cemented in Asia, with a core foundation and manufacturing footprint in China. According to the analyst, moving even 10% of the supply chain from Asia to the U.S. would take three to four years, costing billions of dollars and causing significant supply chain challenges and delays.
The broader worry, the analyst said, is China aggressively taking a retaliatory approach and constricting the supply chain for next-generation Nvidia Corp. (NVDA) chips or hardware.
He added that in the process, the country could drive more Chinese consumers to buy Chinese goods, like Huawei over Apple, Inc. (AAPL) and BYD Co. Ltd. (BYD) over Tesla, Inc. (TSLA).
Trump's reciprocal tariffs on all nations are set to go into effect on Wednesday, a day the president called "Liberation Day."
On Stocktwits, retail sentiment toward the Technology Select Sector SPDR Fund (XLK) remained 'bearish' (29/100) amid 'high' message volume.
A bearish watcher sees further weakness as tariffs take effect.
Another user said incremental weakness is likely and that they would add following another 5% plunge.
The XLK ETF ended Tuesday's session up 0.73% at $207.99, although it has lost over 10% this year.
For updates and corrections, email newsroom[at]stocktwits[dot]com.<
subscribe to Asianet Newsable WhatsApp channel by clicking here.