Global technology and chip stocks experienced a significant rally on Monday following an agreement between the U.S. and China to temporarily halt most tariffs on each other's goods. This development brought a sense of relief to technology stocks, particularly semiconductor firms and smartphone manufacturers, which had been adversely affected by the ongoing trade tensions between the world's two largest economies. The trade conflict had threatened to disrupt supply chains and negatively impact some of the largest U.S. companies.
Investors were optimistic after the weekend talks between the U.S. and China resulted in a temporary suspension of "reciprocal" tariffs. This positive outcome was reflected in the premarket trading, where several prominent U.S. tech stocks saw significant gains. Nvidia, despite still facing restrictions on the types of chips it can export to China, rose by approximately 4% in premarket trading. Likewise, Advanced Micro Devices (AMD) saw a 5% increase, and companies like Broadcom and Qualcomm also experienced a similar 5% rise.
The semiconductor supply chain, which had been under considerable pressure, also saw a boost. Marvell Technology Group, which had postponed an investor day due to macroeconomic uncertainties, surged by 7.5% in premarket trading. Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest chipmaker, witnessed a 4% increase in its U.S.-listed shares in the premarket, although its Taiwan-listed shares were unaffected as they closed before the tariff announcement.
In Europe, the positive trend continued as ASML, a key supplier of machinery essential for manufacturing advanced chips, rallied by 4.5% in early trading. Infineon Technologies, another major player in the semiconductor industry, also saw significant gains.
Although semiconductors and certain electronics had been granted an exemption from U.S. President Donald Trump's reciprocal tariffs the previous month, the U.S. government indicated that this reprieve might be temporary. There was still a possibility that these products could be subject to special duties in the future. This uncertainty contributed to investor concerns about the impact on major tech stocks, particularly those with significant exposure to China, such as Apple and Amazon.
Apple, which produces 90% of its iPhones in China, had previously stated in its earnings report that it anticipated a $900 million increase in costs for the current quarter due to tariffs. Despite this, Apple shares rose by more than 7% following the tariff pause announcement. Amazon, which relies on Chinese products for many of its sellers, also saw an 8% increase in premarket trading on Monday.
Chinese tech stocks listed in the U.S. also experienced a surge. E-commerce giants Alibaba and JD.com, along with the internet company Baidu, saw their stock prices rise.
Daniel Ives, global head of technology research at Wedbush Securities, expressed optimism about the situation in a note on Monday. He mentioned that with the U.S. and China on an accelerated path towards a more comprehensive trade deal, new market highs for tech stocks could be expected by 2025. He emphasized that the developments over the weekend were a significant win for investors and represented the best-case scenario.
This positive sentiment reflects a broader sense of relief and optimism within the market, as investors now focus on the potential next steps in the trade discussions between the U.S. and China, which are expected to unfold over the coming months. Overall, the temporary pause in tariffs has provided a much-needed boost to the technology sector and reassured investors of the potential for a more stable economic relationship between the two economic powerhouses.