How would be the tech sector affected by an eventual trade war?

After the new tension that Donald Trump created with his twits and China's responses, everyone is wondering what will happen if there is no agreement between the US and China. Many analysts are of the opinion that the most affected by such a negative development will be the automotive and technological sectors. In order to understand the answer to this question, we have to look at the companies revenue exposure toward China.

The chart shows that the most affected companies in the technology sector would be chip and semiconductor manufacturers. They have the largest exposure to China. The appendix to the list is Apple, but Iphone sales in China have been a problem for years. Considering Apple's size and diversification in the offered products and services, we can expect short-term and limited negativity over the company's shares. If we look at other FAANG technology giants, they would rather be less than the sales of products in China than the overall negativity that the markets will face.

If we talk about Facebook and Google, China has its own similar platforms in the face of Weibo, Baidu and Wechat anyway. These two companies are likely to have the best chance of a quick recovery after a possible downturn triggered by a trade war.

The last downturn since December and the recovery of the market by the end of April were dictated precisely by speculation about the war. Until now we can expect that the bottom of the last correction is the fair price of the indices in the event of a failure of the trade negotiations, which for now remains hypothetical. For Nasdaq, this would mean a fall to around 5700 levels, a very likely scenario in announcing the end of negotiations and setting tariffs from the two largest economies in the world.

Chart source: HSBC / CNBC

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