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What Drove Semiconductor Stocks Over 4% amid Trade Tensions?


Jun. 6 2019, Updated 10:58 a.m. ET

Semiconductor stocks rise for the first time since the trade war’s escalation

After falling for more than 15 days amid rising US-China trade tensions, the VanEck Vectors Semiconductor ETF (SMH) rose 4.1% on June 4. The rise came after US Federal Reserve Chair Jerome Powell hinted at the Fed’s openness to easing monetary policy to protect the economy from trade tensions with China and Mexico.

Even Republican lawmakers were expected to be prepared to block US President Donald Trump from imposing new tariffs on Mexican imports in the name of a national emergency.

The above signs saw the SPDR S&P 500 ETF (SPY) rise 2.2%, the Dow Jones Industrial Average rise 2.1%, and the Nasdaq Composite Index rise 2.7% on June 4. The Nasdaq was driven by mid- and high-single-digit growth in some semiconductor stocks.

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Top chip stock gainers on June 4

The biggest gains were reported by Advanced Micro Devices and NVIDIA, which rose 7.2% and 6.9%, respectively, on June 4. AMD gained as the company announced several alternatives to grow in markets outside China. For instance, it announced a licensing deal with Samsung that will bring the former’s graphics technology to mobile devices. NXP Semiconductors stock rose 5.6% on June 4 after it announced plans to acquire Marvell’s wireless connectivity business.

However, this rise is temporary, as the overall semiconductor outlook remains bleak for this year.

World Semiconductor Trade Statistics expects the worldwide semiconductor market to fall 12.1% YoY (year-over-year) to $412.1 billion in 2019 driven by a 30.6% decline in the memory market and a 23.6% decline in the Americas. The 23.6% decline could come as the US bans chip sales to Huawei and makes imports and exports from China difficult. China is the largest market for many US chip companies.

Unless the US and China end the trade war, things could be bleak for the semiconductor industry. In the meantime, chip companies are looking to tackle the trade war.


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