The fall in technology shares is a ‘golden buying opportunity’ for investors, says analyst

• The recent technology sell-off is a “golden buying opportunity,” according to Wedbush.

• The midweek decline in technology stocks was partly caused by Trump’s aggressive comments on Taiwan.

• But solid second-quarter earnings results should lead to a recovery in tech trading, Ives said.

The selloff in technology stocks represents a “golden buying opportunity” for investors, according to Wedbush analyst Dan Ives.

The recent sell-off was fueled in part by former President Donald Trump’s aggressive comments about Taiwan and the potential for more tariffs on Taiwan. an interview with Bloomberg Businessweek.

“They’ve seized about 100% of our chip business. I think Taiwan should pay us for defense. You know, we’re no different than an insurance company. Taiwan doesn’t give us anything. Taiwan is 9,000 miles away. It’s 42 miles away .” miles away from China,” Trump said.

“Taiwan took our chip business away from us, I mean, how stupid are we? They took all our chip business away. They’re extremely rich. And I don’t think we’re much different from an insurance policy. Why? Why are we doing this?” Trump asked.

With opinion polls and betting markets recently in favor of Trump before the November election, investors took Trump’s comments seriously, with the Nasdaq 100 down more than 3% since the interview was released. Chip stalwarts were also sold on reports that President Joe Biden’s administration was preparing a new round of restrictions on trade with China to limit access to cutting-edge technology.

But Ives said Trump’s rhetoric may be more bark than bite, and that the latest tech sell-off ultimately presents a great buying opportunity for long-term investors.

“This is all a high-stakes game of poker for the Trump campaign and a shot across the bow against XI/Beijing,” Ives wrote. “We believe that the ‘Trump trade’ does not ruin the thesis of the AI ​​revolution and the tech bull market and that to some extent it is just a negotiation that will be a long and difficult process.”

Semiconductor manufacturing won’t move to the US in a significant way anytime soon; Taiwan produces about 92% of the world’s supply of advanced microchips.

And now that the world economy is dependent on the silicon wafers coming from Taiwan, it is not in the best interest of the US to disrupt that by letting China take over.

Todd Jablonski of Principal Asset Management said this technology sell-off is just a small blip in the grand scheme of things.

“A potential Trump administration will not disrupt the forward momentum of the US major tech sector. These types of market disruptions are common as the election approaches, and investors should be cautious about making moves based on these fluctuations,” Jablonski said in a note. Thursday.

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Ultimately, what matters most for the long-term price of tech stocks are earnings, and that area is still a bright spot, according to Ives.

“Our playbook remains the thesis of the AI ​​revolution and the winners of sell-offs like yesterday. We believe second quarter earnings will be a major positive catalyst for the technology sector and expect technology stocks to rise another 15% this year, contributing to the second quarter earnings growth. robust technology gains in the first half of 2024 as the broader technology growth story takes center stage,” Ives said.

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