U. S. tech giants have generally shut down their profits, and their functionality sends a clear message that China’s impact on the bottom line is unlikely to ignore.
Tesla has felt the slowdown in demand in China, with sales falling 4% in the first quarter. Meanwhile, Apple saw 18% of its sales come from China, underscoring the central role the country plays in its profits.
The knowledge of S.
Investors are more attentive to China’s influence on the earnings of some of the largest U. S. tech corporations and, in turn, their stock prices, with experts predicting that the rivalry between the two superpowers will reshape the U. S. tech landscape in the future.
Geopolitical tensions
Abishur Prakash, founder of consulting firm The Geo Political Business, told Business Insider that U. S. tech corporations that forget about geopolitical tensions with China pose serious setbacks to their portfolios.
“The exercise has left the season as far as rethinking China goes,” he said. “It’s clear that for a long enough period of time, everyone will have to take sides. “
As for Tesla’s earnings, Prakash said Elon Musk’s electric vehicle company could have done better if it had taken more into account geopolitical realities.
“Tesla has this idea that it could just build in China and then export Chinese-made cars around the world. But now, from India to Europe, there are many who don’t need electric cars made in China,” he said.
“Big tech corporations built their base in China at a time when the geopolitical climate was very different. Today, however, being in China or exporting from China puts corporations on the ‘geopolitical cross,'” he added.
This department may be exacerbated by the challenging macroeconomic situations facing the Chinese economy. In addition to a struggling asset sector and weak customer spending, analysts point to the depreciation of the Chinese currency as a major economic challenge.
Kelvin Wong, senior market analyst at Oanda, told BI that the devaluation of the Chinese yuan aimed at boosting export expansion amid weak domestic demand will likely depreciate the currencies of other key exporters such as South Korea, Taiwan and even Japan.
“These countries are seen as ‘friendlier nations’ in the U. S. strategic relocation/decoupling plan, which in turn may cause a cycle of negative commentary on the inventory costs of U. S. large-cap generation companies,” he said.
“Tech stack division 2”
In the burgeoning field of synthetic intelligence, experts said “per eye” restrictions imposed through the U. S. and China on key technologies would produce knock-on effects on U. S. tech companies.
“Our view is that we are coming to what we call a ‘split into two tech stacks,’ where, in essence, each country, the U. S. and China, isolates or separates their tech stacks from each other. ” said Pelosky, the founder of TPW Advisory told BI.
According to Pelosky, despite the tightening of U. S. sanctions against China in the technological field, Beijing could eventually exert influence in Southeast Asia, where countries such as Vietnam, Malaysia, and Indonesia will be influenced by Chinese technological dominance due to the influence. of Chinese companies. Cheaper costs and greater scale compared to their U. S. counterparts.
“U. S. tech corporations are going to compete for a smaller slice of the global expansion pie, as Southeast Asia is the fastest-growing region in the world,” he said.
Decoupling in progress
Prakash said that in the past, U. S. tech corporations now have a new strategy: “Keep America happy, keep their business in China, and look for new markets to make up for a ‘Chinese loss. ‘”
“Just take a look at how Nvidia and AMD are building traditional chips to get the Chinese market compliant with sanctions,” he said.
Nvidia has yet to report results, but expectations are high. Still, Prakash said the chipmaker faces a “complex situation” in China.
“On the one hand, the U. S. government is constantly shutting down door after door what Nvidia can sell to China. On the other hand, China is employing official and unofficial channels for Nvidia chips,” he said.
Experts say China is contributing less and less to the revenues of U. S. large-cap generation companies.
“Looking ahead, it looks like the U. S. -China high-tech war continues, where friendly reshoring and decoupling of technology-related chains have gained traction post-COVID,” Wong said.
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