Are Semiconductors Poised to Thrive Into Q4?

Another round of tariffs, another handful of industries starting to feel the heat from the President Trump’s “America first” approach to achieving global trade parity. Add to that the simmering tension in negotiations with America’s NAFTA cohorts, and the next few months could approach a definitive moment for the U.S. and its trading powers.

This time the office of the US Trade Representative (USTR) is focusing its efforts on intellectual property theft from China, while China has introduced its own counter-tariffs that take further aim at $60 billion worth of U.S. raw materials and agriculture, two industries that makeup a key part the president’s base.

The biggest industry outcry so far from the latest list of proposed import taxes has come from representatives of the semiconductor and graphics processing unit (GPU) producers. When USTR released its list of taxable imports, SEMI, the global industry association serving the manufacturing supply chain for the electronics industry, released a statement in August estimating the added cost of 29 items to be about $500 million annually to its semiconductor-related companies.

Related: Aerospace & Defense Bulls: More Room to Run?

The semiconductor industry took a marked dip following the proposal, as well as less-than-stellar earnings from Taiwan Semiconductor that showed lowered guidance for the fiscal year.

SOXL and SOXS vs. PHLX Semiconductor Sector Index

Data Range: 8/15/2018 – 8/31/2018. Source: Bloomberg. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For standardized performance and the most recent month-end performance, click here.