Tech Stock Turmoil: A Golden Buying Opportunity Amid Trump's Taiwan Comments, Says Analyst

According to Wedbush analyst Dan Ives, the recent sell-off in technology stocks presents a “golden buying opportunity” for investors. This sell-off was partly triggered by former President Donald Trump’s hawkish remarks on Taiwan and the potential for more tariffs during an interview with Bloomberg Businessweek.

Trump’s Taiwan Comments

“They took about 100% of our chip business. I think Taiwan should pay us for defense. We’re no different from an insurance company. Taiwan doesn’t give us anything. Taiwan is 9,500 miles away. It’s 68 miles away from China,” Trump said.

“Taiwan took our chip business from us. How stupid are we? They took all of our chip business. They’re immensely wealthy. I don’t think we’re any different from an insurance policy. Why are we doing this?” Trump added.

With polls and betting markets recently favoring Trump’s candidacy for the November election, investors reacted seriously to his comments, causing the Nasdaq 100 to fall more than 3% since the interview was released. Chip stocks also declined amid reports that President Joe Biden’s administration is preparing new restrictions on trade with China to limit its access to advanced technology.

A Buying Opportunity

However, Ives noted that Trump’s rhetoric might be more bark than bite, and the recent tech sell-off represents a significant buying opportunity for long-term investors.

“This is all a high-stakes poker game for the Trump campaign and a warning shot against XI/Beijing,” Ives wrote. “We believe the ‘Trump trade’ does not undermine the AI Revolution thesis and tech bull market. It’s just a negotiation that will be long and drawn out.”

Semiconductor production is unlikely to shift significantly to the US anytime soon, as Taiwan produces about 92% of the world’s advanced microchip supply. With the global economy dependent on Taiwan’s silicon wafers, it’s not in the US’s best interest to disrupt that by letting China take over.

Principal Asset Management’s Todd Jablonski stated that this tech sell-off is a tiny blip in the grand scheme.

“A possible Trump administration doesn’t disrupt the forward momentum of big tech in the U.S. These types of market fluctuations are common as we approach elections, and investors should be cautious in making moves based on these blips,” Jablonski said in a note on Thursday.

Long-Term Outlook for Tech Stocks

Ultimately, the most crucial factor for the price of tech stocks over the long term is earnings, which remains a bright spot, according to Ives.

“Our strategy remains to own the AI Revolution thesis and capitalize on sell-offs like yesterday. We believe 2Q earnings will be a major positive catalyst for the tech sector and expect tech stocks to rise another 15% for the year, adding to the robust tech gains in 1H2024 as the broader tech growth story takes center stage,” Ives said.