In this article, we discuss 5 stocks that will suffer if China invades Taiwan. If you want to see more stocks in this selection, click 10 Stocks That Will Suffer If China Invades Taiwan.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 80
Tesla, Inc. (NASDAQ:TSLA) is greatly dependent on China. Its Shanghai factory was responsible for roughly half of Tesla, Inc. (NASDAQ:TSLA)’s manufacturing in 2021, and China is one of the leading markets for its vehicles. Elon Musk has also said that China has the potential to become the largest market for Tesla, Inc. (NASDAQ:TSLA). If China were to invade Taiwan, Tesla, Inc. (NASDAQ:TSLA) would be impacted heavily in case the People’s Republic decides to ban its vehicles in the country, or if the US pressures Tesla to exit China.
On August 3, Morgan Stanley analyst Adam Jonas said that House Speaker Nancy Pelosi’s visit to Taipei “casts the global battery race into a new light” and noted that Tesla, Inc. (NASDAQ:TSLA) is “highly exposed to both the risk and the opportunity” in the global EV battery dominance. Tesla, Inc. (NASDAQ:TSLA) has the largest exposure to the domestic Chinese market, said the analyst, who also thinks Tesla, Inc. (NASDAQ:TSLA)’s role in building American and Western European renewable energy infrastructure is “underappreciated”. He reiterated an Overweight rating and an $1,150 price target on Tesla, Inc. (NASDAQ:TSLA) shares.
Among the hedge funds tracked by Insider Monkey, Cathie Wood’s ARK Investment Management is one of the leading stakeholders of Tesla, Inc. (NASDAQ:TSLA) as of Q1 2022, with 1.6 million shares worth $1.7 billion. Overall, 80 hedge funds were long Tesla, Inc. (NASDAQ:TSLA) at the end of March 2022, down from 91 funds in the earlier quarter.
Here is what GMO LLC has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2022 investor letter:
“To put the demand growth for clean energy materials into perspective, let’s look at Tesla (NASDAQ:TSLA). At its Battery Day last year, Tesla projected three terawatt hours of lithium-ion battery capacity needed in 2030 for the EVs and storage they expect to produce. To reach this target, Tesla alone would gobble up approximately 75% of the world’s current nickel production and four times the world’s current lithium production. These numbers are astounding enough, but when one considers that EVs currently represent just 15% of global nickel demand and about 45% of lithium demand and that Tesla will likely be producing only a small proportion of the world’s EVs in 2030, the implications are staggering. Clean energy materials companies will make a lot more money in the decades to come than they ever have both because they will be selling a lot more metric tons of material and because there are certain to be shortages where supply can’t keep up with the rapidly growing demand.”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 81
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells integrated circuits and semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. TSMC Chair Mark Liu said on August 2 that if China were to invade Taiwan, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s factories would be rendered “not operable”. The company will be one of the worst hit firms in case of a Chinese invasion.
On August 1, Susquehanna analyst Mehdi Hosseini lowered the price target on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to $88 from $90 and kept a Neutral rating on the shares. The analyst observed Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s robust revenues in 2022 actually make 2023 more challenging. He said it is encouraging to see Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) noting a looming inventory correction, but said the 1H23 inventory correction will be harsher than expected.
According to Insider Monkey’s data, 81 hedge funds were bullish on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of Q1 2022, up from 72 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the leading stakeholder of the company, with more than 26 million shares worth $2.7 billion.
Here is what ClearBridge International Growth EAFE Portfolio has to say about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q2 2022 investor letter:
“Disciplined selling is a key component of our risk-based approach, especially among companies with cyclical growth drivers. We have seen good success over the last several years from our semiconductor exposure but have been taking profits in companies such as, this quarter in Taiwan Semiconductor (NYSE:TSM) to reduce overall industry exposure. Given the exceptional sets of circumstances of semi shortages, double ordering and good growth in end market products including personal electronics and even data centers, we believe a neutral market position to this industry within the tech sector is appropriate.”
3. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 83
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a California-based semiconductor company that operates in two segments – Computing and Graphics, and Enterprise, Embedded and Semi-Custom. Advanced Micro Devices, Inc. (NASDAQ:AMD) has global operations, and its assembly and test manufacturing facilities are located in Malaysia and China. If China invades Taiwan, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s manufacturing line could be significantly impacted as tensions between the US and China escalate.
On August 3, JPMorgan analyst Harlan Sur lowered the price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) to $120 from $140 and kept a Neutral rating on the shares. The analyst said that despite Advanced Micro Devices, Inc. (NASDAQ:AMD)’s optimistic outlook on the second half of the year after a strong first half and a reaffirmation of its full year guidance, he slashed forward estimates to factor in slowing global demand that he thinks will pose challenges to the global PC and server total addressable market. Although Advanced Micro Devices, Inc. (NASDAQ:AMD) is still achieving significant processor market share, growth rates are beginning to get impacted as macro issues start to strengthen heading into 2H22, contended the analyst.
According to Insider Monkey’s data, 83 hedge funds were long Advanced Micro Devices, Inc. (NASDAQ:AMD) at the end of March 2022, up from 69 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management featured as the leading position holder in the company, with 24.3 million shares worth $2.6 billion.
Here is what Carillon Tower Advisers has to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2021 investor letter:
“Advanced Micro Devices (AMD) supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 102
NVIDIA Corporation (NASDAQ:NVDA) was incorporated in 1993 and is headquartered in Santa Clara, California. The company designs semiconductors and integrated circuits, but does not manufacture them. TSMC manufactures the bulk of NVIDIA Corporation (NASDAQ:NVDA) chips, and with TSMC hit by the Chinese invasion, NVIDIA Corporation (NASDAQ:NVDA) will also suffer as a consequence.
On July 25, Barclays analyst Blayne Curtis lowered the price target on NVIDIA Corporation (NASDAQ:NVDA) to $200 from $295 and kept an Overweight rating on the shares. The latest semiconductor rally should fade as it is “way too early to buy the dip,” the analyst told investors in a research note. He believes semis are still in for a “substantial reset” and he slashed wafer fab equipment estimates.
Among the hedge funds tracked by Insider Monkey, Phill Gross and Robert Atchinson’s Adage Capital Management is one of the leading stakeholders of NVIDIA Corporation (NASDAQ:NVDA), with 2.5 million shares worth $694.4 million. Overall, 102 hedge funds were bullish on the stock at the end of Q1 2022.
Here is what ClearBridge Large Cap Growth ESG Strategy has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2022 investor letter:
“Chipmaker Nvidia (NASDAQ:NVDA) has also been pressured by multiple compression of higher growth companies and weakness in its gaming business. While Nvidia has grown into a top 10 position with its strong performance through late 2021, we have been consistently trimming the position to derisk against short-term volatility in its gaming business. The company is clearly exposed to the semiconductor cycle but also participates in the secular growth of cloud and AI adoption through its data center business. With these secular drivers intact and new products ramping up in the second half of the year, we are maintaining an overweight to the company.”
1. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Apple Inc. (NASDAQ:AAPL)’s largest iPhone factory is operated by Foxconn Technology Group in Zhengzhou, Central China’s Henan Province. If the US and China were to put economic sanctions on each other, Apple Inc. (NASDAQ:AAPL) stands to suffer incredibly as it is largely dependent on the Chinese supply chain and labor force.
Morgan Stanley analyst Erik Woodring estimated that Apple Inc. (NASDAQ:AAPL)’s App Store net revenue growth declined to 1% year-over-year in July from 2.5% year-over-year growth last month. The deceleration, which the analyst observed was worse than he anticipated, was driven by year-over-year slowdowns in all of the App Store’s 10 biggest markets, except for Germany and France. His Q3 2022 App Store estimates for 5% year-over-year growth remain unchanged, and he maintained an Overweight rating and a $180 price target on Apple Inc. (NASDAQ:AAPL) shares on August 3.
Among the hedge funds tracked by Insider Monkey, 131 funds were bullish on Apple Inc. (NASDAQ:AAPL) at the end of Q1 2022, compared to 134 funds in the prior quarter. Warren Buffett’s Berkshire Hathaway is the largest stakeholder of the company, with 891 million shares worth $155.5 billion.
Here is what Wedgewood Partners has to say about Apple Inc. (NASDAQ:AAPL) in its Q2 2022 investor letter:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
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