U.S. tech firms like Apple Inc (NASDAQ: AAPL), Tesla Inc (NASDAQ: (TSLA)), and others — mainly listed on the Nasdaq, could be caught in the crossfire between Beijing and Washington D.C., according to Wedbush analyst Daniel Ives.
The Thesis: Ives wrote in a note Monday that the biggest risk to tech stocks is the current tensions between the United States and China.
Ives said while, for now, the tensions are a “contained risk,” in the coming months, they represent “a fork in the road” situation. The analyst explained that the outcome would depend on which “path the Biden Administration takes on extending (or NOT) an olive branch to Beijing and President Xi.”
While Ives pointed to Apple, Tesla, and Cisco Systems Inc (NASDAQ: CSCO) as names that are the poster children of the current tensions, he outlined the key worries surrounding the Tim Cook and Elon Musk-led companies.
Apple is the top poster child for the trade tensions, according to Ives, as it produces almost all of its phones in China with approximately 20% of the demand coming from the region.
As per Ives, especially important to the Cupertino, California-based tech giant is the factory of its supplier Hon Hai Precision Industry Co, Ltd (OTC: HNHPF) — also known as Foxconn.
Ives noted that the iPhone maker was in the midst of an unprecedented two year iphone-12/13 supercycle release.
“Apple diversifying out of China at this point is essentially off the table, although we could see new pockets of manufacturing in Vietnam over the next year,” the analyst wrote.
See Also: Apple Looks To Make iPads in India This Year, In A Shift Away From China: Report
As for Tesla, given its market share in China is rising and EV demand is skyrocketing, Ives said it is not shocking that Beijing moved to restrict military and state personnel from owning a vehicle made by the automaker.
“It clearly indicates “big brother is watching” the situation closely,” wrote Ives. Ives said that the Musk-led company’s “Giga footprint” constituted a strategic advantage over other EV players both foreign and domestic.
“We believe Tesla has potential to be on a 300k run rate of demand in China by the second half of this year.”
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Nasdaq (TSLA) – Apple Inc. (NASDAQ:AAPL), Tesla Motors, Inc. ((NASDAQ:(TSLA))) – ‘Biggest Risk’ Facing Apple, Tesla, Other Nasdaq Stocks? US-China ‘Cold Tech War,’ Says Analyst
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