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US-China trade war tensions drag US stocks lower after Nvidia (NVDA) reported restrictions on exports to China would cost the chipmaker $5.5 billion. CFRA Research chief investment strategist Sam Stovall joins Morning Brief with Madison Mills and Brad Smith to discuss what the uncertainty means for first quarter earnings and chipmakers' outlooks.
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
US futures moving to the downside as more trade policy woes battle big tech. Nvidia revealing on Wednesday morning that the US government has imposed costly new restrictions on chip exports. The company forecast a five and a half billion dollar quarterly change tied to the new curb. The stock declines come just days after the broader tech sector rebounded on news that some consumer techno technology would be exempt from reciprocal tariffs. Joining us to discuss Sam Stovall, CFRA researches chief investment strategist. Sam, great to speak with you here, but just a few days ago in your note you talked about green shoots appearing in the market post sell off. Sitting here today with all of the whip sign of policy that I just mentioned and the impact on the tech industry, where do you see the tech sector heading?
Well, good morning Madison. Well, basically we still see the tech sector heading higher, higher in the longer term. That's where our focus is. Our analysts look 12 months down the road. Uh certainly in the near term because of so much uncertainty, I think investors are pretty much in limbo waiting to get some news that actually will last longer than a day. Uh and so right now I guess the question is what about Q1 earnings? Right now expectations are for semiconductors and semiconductor equipment to post very strong 30 plus percent gains. So I I think they're going to be listening very closely to the guidance offered by management.
And so within that guidance, is it enough for management to hear that sure negotiations, they could start up, there could be some information that leaks out that gives them some sense of confidence to still guide towards what they've already communicated to investors at the beginning of the year, and let's also add the reminder that at the beginning of the year that's typically when we see some of those guidances actually get revised lower just to kind of level set. So how much confidence do you expect from CEOs in an environment where they're just waiting for any semblance of clarity?
Morning Brad, actually not much clarity I think is going to be coming out of management conversations with investors and analysts. Uh I think that they are just as confused and concerned as the investors are, and at the same time they don't want to be sounding too Pollyanna-ish in the face of tariffs and news that could change on a daily basis. So, just like United Airlines giving a two-handed forecast in terms of whether we do have a recession, whether we don't have a recession, I think that companies are going to be very careful about how much guidance they do offer. And usually management would prefer to guide down so that when that time comes they can then beat what those revised estimates have been.