Semiconductor Stocks Hit by Tariff Concerns and China AI Disruption, But Retail Investors Stay Bullish
Nvidia Corp. (NVDA), Broadcom Inc. (AVGO), and Applied Materials Inc. (AMAT) experienced significant declines in pre-market trading on Monday, reflecting the growing concerns among investors about the potential impact of President Donald Trump’s import tariffs on the global tech supply chain. While these concerns are compounded by the threat posed by China’s DeepSeek AI models, retail investors remain bullish on these stocks, according to data from Stocktwits.
Tech Tariffs Spark Investor Anxiety
The latest selloff comes amid rising fears that new tariffs on goods from China, Canada, and Mexico could disrupt the semiconductor industry, particularly companies with significant exposure to China, such as Nvidia and Broadcom.
China has become a crucial market for these chip makers, with Nvidia deriving roughly one-third of its revenue from China, as reported by FinChat. The growing concern over the DeepSeek AI models, developed by a Chinese startup and capable of rivaling Western technologies, is also weighing heavily on the sector. Nvidia, in particular, has seen its stock plummet more than 16% over the past week, following fears that cheaper AI models from China could dampen demand for its high-cost AI processors.
Retail Investors Remain Bullish Despite Market Woes
Despite the sharp declines in the semiconductor sector, retail sentiment on Stocktwits remains overwhelmingly bullish. Nvidia, which saw a 3.5% drop in pre-market trading, still holds a year-to-date gain of over 95%, underscoring the confidence that retail investors continue to place in its long-term growth prospects, despite recent setbacks.
Both Broadcom and Applied Materials also saw their stocks slip, with Broadcom falling by 2% and Applied Materials down by nearly 2.5%, but Stocktwits sentiment for both stocks remained bullish, with exceptionally high levels of message volume indicating that retail investors are still optimistic about the future of these tech giants.
China Exposure Driving Investor Concerns
With approximately 40% of Applied Materials’ revenue coming from China in 2024, concerns about the DeepSeek AI threat and trade tariffs are particularly significant. Other major players in the wafer fabrication equipment (WFE) space, such as ASML Holding NV (ASML), KLA Corp. (KLAC), and Lam Research Corp. (LRCX), also face substantial exposure to China, with up to 50% of their revenue tied to the region.
In spite of the recent losses, Applied Materials has experienced an overall gain of nearly 10% in the past year, demonstrating its resilience in a turbulent market.
Retail Sentiment at Odds with Market Trends
While the semiconductor sector faces volatility, particularly due to the impact of tariffs and AI disruptions, retail investors’ optimism remains unshaken. This dissonance highlights the ongoing tension between institutional and retail investors, as the broader market remains cautious about trade uncertainties while individual traders continue to bet on the long-term growth of semiconductor companies like Nvidia, Broadcom, and Applied Materials.
As the trade tensions and AI disruption from China continue to evolve, semiconductor companies with substantial exposure to the region will likely remain under pressure, but retail sentiment offers an intriguing counterpoint, showing continued confidence in these stocks.
