Tariff talk and trade war speculation has affected an array of sectors and industries, including the semiconductor space. The iShares PHLX Semiconductor ETF (NasdaqGM: SOXX) is lower by nearly 2% over the past month.

There are some risks to consider with semiconductor stocks and ETFs. For example, President Donald Trump has pushed for restrictions on trade barriers with China, which might pose a threat to the sector. China is a key market for the global semiconductor industry, consuming more than $100 billion worth of semiconductors or roughly one-third of the world population.

The VanEck Vectors Semiconductor ETF (NYSEArca: SMH), another widely followed semiconductor exchange traded fund, has also endured some recent weakness. However, some market observers believe chip stocks can bounce back.

“Some market strategists say that while the chips have been mired in international tariff disputes, they may bounce back due to sustained demand for cloud technology and other devices and software for which semiconductors can be essential,” reports CNBC.

Tariff Vulnerability for Semiconductors

Investors could be paying up for future catalysts for semiconductor and broader technology names. If there is a silver lining for the rising valuations on chip stocks it is that some industry observers believe the group’s valuations should not be measured in the traditional sense because of the evolution of the semiconductor business.

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