Semiconductor stocks get a big boost after US, China reach trade truce

In June, semiconductor stocks had experienced a high level of fluctuation, marked by last week’s spike following Micron’s (Nasdaq: MU) impressive earnings report. The chipmakers are maintaining the upward momentum, buoyed mainly by the de-escalation of US-China trade dispute after the positive outcome of the talks held at the G8 summit.

Most of the US-based semiconductor companies have significant exposure to the Chinese market and the trade truce could revive the sagging sales. According to reports, President Donald Trump will hold further talks with the Chinese premier on relaxing the trade regulation, while touching upon the Huawei issue and the ban imposed by on several Chinese tech companies.

Most of the US-based semiconductor companies have significant exposure to the Chinese market and the trade truce could revive the sagging sales

This week’s semiconductor rally comes after days of uncertainty amid concerns that the market for memory chips is unlikely to recover before the second half of next year, which had dragged down the stocks on multiple occasions in recent weeks. Also, the oversupply of DRAM and NAND memory chips attracted negative rating actions from market watchers.

Related: NVIDIA stock surges on Q1 earnings beat

The Philadelphia Semiconductor Index was up about 3% during the early hours on Monday. Advanced Micro Devices (AMD) gained 3%, after ending the previous session lower. Nvidia (NVDA), which closed the last trading session slightly higher, was trading up 3% when trading started. Intel made a relatively smaller gain of 1%, extending last week’s uptrend, while Micron led with early gains of about 6%.

Meanwhile, data-storage company Western Digital (WDC) witnessed a spike in its stock price early Monday for a different reason. Investor sentiment turned upbeat following news that production was halted at a plant in Japan due to a power outage. The general view is that lower production would improve the company’s inventory position, considering the oversupply of memory chips. The stock gained more than 5% in early trading.

Also see: AMD Q1 2019 Earnings Conference Call Transcript

The entire business world was relieved after the talks between Trump and Jinping ended on a positive note as most Wall Street industries were facing uncertainty due to the trade war. The federal government has reportedly promised not to impose any more tariffs on Chinese imports as of now, though those levied earlier will remain in effect.

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