J.P. Morgan: Trade War Could Lead to a 20% Plunge in Tech Stocks such as TSMC, Recommends Taking Profits First

Morgan Stanley said in its latest report that Asian tech stocks may face a 20% downside risk in the short term amid escalating tariffs, trade tensions, and overvaluation. The report reminds investors to take profits as soon as possible. In addition, the report also stated that they are more bullish on China's domestic semiconductor industry in the future due to its larger domestic sales proportion, which is less likely to be affected by tariff measures. President Trump originally planned to impose a 25% new tariff on imports from Mexico and Canada starting on February 4, and a 10% tariff on imports from China, shocking the global financial markets. Fortunately, after coordination, the U.S. announced this morning a temporary suspension of tariffs on Canada and Mexico, which caused BTC to rebound and break through $100,000. However, the tariffs on China proceeded as scheduled, and the Beijing government also retaliated earlier, announcing that it would impose a 10-15% tariff on some U.S. products starting on February 10, causing concerns in the market that the U.S.-China trade war may reignite. In the background of the global tariff war ignited by Trump, Bloomberg reported that Morgan Stanley analysts stated in their latest report that market investors should take profits from Asian tech stocks immediately due to regional trade risks, overvaluation, and insufficient upside potential. In recent years, there has been a global AI frenzy, and many Asian tech stocks have benefited from it. Taiwan, in particular, has excelled in this AI craze, and TSMC, the leading semiconductor manufacturer, accounts for 64.9% of the global wafer foundry manufacturing rate, making it an undeniable force in the global AI craze. Although Morgan Stanley did not specifically point out which companies would be affected, analysts including Shawn Kim stated in the report that the market's optimism about the industry's profitability is generally excessive. If tariffs are increased and trade tensions intensify, the industry may face a 20% downside risk in the short term: In the short term, it is necessary to reduce the exposure to tech stocks and hedge the holdings in the industry. In addition, Trump has previously stated several times that he will impose more tariffs on foreign-produced computer chips and semiconductors. In response, Morgan Stanley analysts pointed out that the industry is expected to follow the downward trend of the 2018 U.S.-China trade war. According to surveys, the U.S.-China trade war officially began on January 22, 2018, and temporarily ceased in December 2018. During this period, the Taiwan Weighted Index fell from a high of 11270 to 9400, a 15.6% decline. Morgan Stanley: Bullish on China's domestic semiconductors, not global semiconductors. On the other hand, although the Morgan Stanley report is not optimistic about global semiconductor stocks, its analysts stated that they are bullish on China's domestic semiconductor industry: We are more bullish on internet and domestic Chinese semiconductor stocks than global semiconductor stocks. The report believes that Chinese semiconductor industry will benefit from trade tensions due to its higher proportion of domestic sales, including Chinese wafer foundries and equipment companies such as SMIC, TSMC, and Hua Hong Semiconductor.