Are Tech Stocks Exposed to China Risk?
In a recent note from Piper Sandler, it was highlighted that tech stocks are heavily exposed to China, which could potentially put gains at risk. According to the firm’s chief global economist, Nancy Lazar, S&P 500 large-cap companies have a near-record reliance on sales in China. This comes at a time when China is facing challenges in its real estate industry and an increased push by Beijing to support domestic companies.
Why should investors be concerned about this? Tech companies, in particular, are vulnerable to any weakness in China, with semiconductor businesses generating more than 30% of their sales in the country. Recent reports, such as China ordering its largest telecommunications carriers to stop using foreign chips, have added to these concerns.
The impact of this exposure is already being felt in the market, with the VanEck Semiconductor ETF (SMH) dropping about 7% in April, underperforming the S&P 500. Shares of companies like Advanced Micro Devices and Intel have also seen significant declines this month.
What does this mean for investors moving forward? With China’s economy still facing challenges from the real estate correction and the possibility of new bond defaults looming, it is important for investors to reassess their exposure to companies with heavy ties to China.
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