17 May

How Trump’s Executive Order Affected Tech Stocks

WRITTEN BY Mohit Oberoi, CFA

National security

US President Donald Trump has declared yet another national emergency. On Wednesday, Trump signed an executive order saying “foreign adversaries are increasingly creating and exploiting vulnerabilities in information and communications technology and services.” After Trump’s executive order, the Commerce Department added Huawei to the Bureau of Industry and Security’s (or BIS) Entity List.

How Trump’s Executive Order Affected Tech Stocks

The executive order makes it difficult for US companies to do business with Huawei and its affiliates. As expected, China has lashed out against the US action. CNBC reported that China has said, “We ask the U.S. to stop further actions, so Chinese companies can have a more normal environment to trade, to avoid further escalation of U.S.-China trade tensions.”

Qualcomm

Qualcomm (QCOM) especially came under pressure yesterday and lost 4.0%. The company is one of Huawei’s suppliers and the move would negatively impact the company. Micron (MU) also lost 2.9%, while Intel (INTC) dropped 0.20% yesterday. Broader markets closed in the green yesterday, and the S&P 500 (SPY) and the NASDAQ Composite (QQQ) rose 0.89% and 0.97%, respectively. Last year, President Trump had blocked Broadcom’s (AVGO) takeover bid for Qualcomm, citing national security reasons.

Section 232 tariffs

This is not the first time Trump has used his power to declare an emergency or invoked national security. Last year, the Trump administration blocked Alibaba-backed (BABA) Ant Financials’ acquisition of MoneyGram, citing national security concerns. In 2017, Trump barred a China-backed fund from buying Lattice Semiconductor.

Along with blocking Chinese companies from acquiring US companies, President Trump has used national security as a pretext for trade issues also and last year imposed Section 232 tariffs on US steel and aluminum imports.

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