(Bloomberg) — There’s virtually nowhere to hide for many US technology companies under President Donald Trump’s new tariff regime, the harshest in a century.
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After Thursday’s slump wiped $1.4 trillion in market capitalisation from the Nasdaq 100 Stock Index, the gauge is down 16% in the past six weeks. The Magnificent Seven even more, at 20%. Chipmakers are in free fall. And there’s little sign the pain will end anytime soon.
China and Taiwan, the global hubs for chip and high-tech manufacturing, got hit with levies of 54% and 32%, respectively. Nascent production bases like Vietnam and India are staring at taxes of at least 26%.
That’s a disastrous setup for companies like Apple Inc., Nvidia Corp. and Broadcom Corp., US technology stalwarts that source hardware components and assembly labor from southeast Asia — and use it to make their intellectual property worth trillions. For years, they’ve woven intricate supply chains that have delivered billions in profits and soaring share prices. It’s a system that can’t be unwound quickly, which means these companies are faced with a difficult choice: hike prices at a time when consumers are stretched thin or absorb costs and watch profits dwindle.
“This is really a worst-case scenario for tech, and I don’t think we’ve seen the end of the selling, since they will continue to suffer until we get more clarity or a change in policy,” said Paul Stanley, chief investment officer at Granite Bay Wealth Management.
Investors reacted swiftly, sending Apple shares tumbling 9.3% Thursday after Trump announced his plan. The drop was the biggest for the iPhone maker since March 2020, erasing more than $310 billion from the company’s market value. A Bloomberg index that tracks the so-called Magnificent Seven stocks sank 6.7%.
An index of chip related companies dropped nearly 10% with Micron Technology Inc. and Microchip Technology Inc. each falling more than 16%. Broadcom sank 11% and Nvidia 7.8%. Amazon.com Inc., whose e-commerce business sells many products sourced from overseas, fell 9%.
Software makers, which have more limited exposure to tariffs, fared much better. Microsoft Corp. and Workday Inc., for example, outperformed the S&P 500 with declines of 3% or less.
Tariffs are the latest headache for a tech trade that was minting money just a few months ago. From the end of 2022 to a February peak, the Nasdaq 100 more than doubled, trouncing the broader S&P 500. Since closing at a record on Feb. 19, however, the tech-heavy benchmark has fallen 16% and underperformed the S&P 500 by more than four percentage points. Traders have been taking profits and rotating into more defensive sectors amid fears of a recession and concerns about a potential pullback in spending on artificial intelligence infrastructure.
