The Big Tech sector is experiencing a strong rebound, fueled by a breakthrough in China-US trade relations. A temporary deal between the two nations has eased some of the most pressing supply chain concerns, reigniting the tech trade that was once both volatile and safe.
US-China Trade Talks Yield Positive Results
Negotiations between the US and China have resulted in a 90-day pause on tariffs, which were a major source of tension between the two countries. This pause has reduced the risks of a global recession and the potential for further splintering between the US and China. The positive outcome has led to a surge in the stock market, with the S&P 500 rising by 3.2%.
A Boon for Tech Investors
The announcement has been especially welcomed by tech investors. The major technology companies, often referred to as the “Magnificent Seven,” are leading the market recovery. These companies, which include names like Apple, Microsoft, and Nvidia, have been outperforming even as the trade situation remains uncertain.
“With US/China clearly on an accelerated path for a broader deal, we believe new highs for the market and tech stocks are now on the table in 2025,” said Dan Ives, an analyst at Wedbush, in a report on Monday. He added that investors are now focused on the next steps in these trade discussions.
Tech Trade and the Risk of Prolonged Conflict
Despite the optimism, tech investors are aware that the risks of a prolonged trade conflict with China still loom large. For companies like Meta, Google, and Amazon, the loss of Chinese advertisers has been a significant challenge. Furthermore, supply chain disruptions and other trade-related issues have affected companies like Tesla, Apple, and Nvidia.
Ives believes the recent pause in tariffs marks a de-escalation between the two countries, which he described as a “dream scenario.” However, there are still many challenges ahead.
Easing Tariffs but Not Solving Key Issues
While the easing of tariffs is a step in the right direction, it does not fully address the underlying trade issues facing the tech industry. In particular, China’s restrictions on chips, its stance on artificial intelligence, and the limited access that American companies have to Chinese markets remain major concerns.
The situation is further complicated by the fact that tariffs are still higher than before the new policy regime. Additionally, many other countries still do not have trade deals in place, which could create more uncertainties for global markets.
The State of Big Tech Stocks
Even with the positive news, the Magnificent Seven tech stocks are still well below their highs from earlier this year. However, these companies have seen significant gains since the announcement of the 90-day tariff pause, aided by strong quarterly earnings and improved relations with China.
On Monday, Microsoft reached a new closing high for 2025. The overall performance of these tech stocks highlights their defensive qualities in times of uncertainty.
Cautious Optimism Amid Unresolved Issues
While the recent trade developments have sparked optimism, there are still some cautionary signs. The easing of tariffs does not guarantee a lasting solution to the trade tensions between the US and China. Many of the trade-related issues that impact the tech industry remain unresolved, leaving room for future volatility.
Big Tech bears have pointed out that many countries still lack trade agreements, and the provisional nature of the China-US pact means the situation could change at any time. Despite these challenges, the bulls remain optimistic that the trade reset could set the stage for further growth in the tech sector.
