US Reprieve for Battered Huawei Helps in Recovery of Tech Sector Stocks
Huawei is the world’s biggest supplier of telecom equipment, but over the past few months, the company has been in absolute turmoil as the American authorities accused that the company’s equipment was a vehicle for Chinese spying and eventually banned it. Additionally, the US also reached out to key allies and asked them not to use Huawei equipment. However, it all escalated earlier this week when the United States President Donald Trump put Huawei in a trade blacklist, by virtue of which no American company could do business with it. For instance, Google announced that the company would no longer allow its Android operating system on Huawei smartphones anymore, and similar other updates came up as the news shocked the markets. The Huawei stock was dumped as soon as the news came out, and eventually, it hit the rest of the tech stocks as well.
This move is going to hurt Huawei’s smartphone business significantly and considering the fact that many chip makers could see a loss of business, many of the chip stocks nosedived after the development. The sell-off started on Monday and crushed many tech stocks, but after Huawei got a minor reprieve from the US government, the stocks recovered. The US government has stated that Huawei could buy goods from American businesses until 19th of August this year and the chip stocks rose right after the announcement. The Philadelphia Semiconductor Index rose by as much as 2.1% and some of the biggest chip stocks like Qualcomm, Intel and Xilinx also recorded significant gains. Tech stocks at large gained 1.2% following the announcement.
The lifting of the gloom surrounding Huawei proved to be a welcome boost for the market. A strategist for an advisory firm stated,
The groups that have been beaten up for the past couple of days have gotten a reprieve. Huawei cast a cloud over tech. It’s so broad-based in how many companies connect with it.
However, it remains to be seen how long this upsurge sustains and whether the companies can come up with alternative methods of boosting revenues once the 19th August deadline passes.