Nearly everybody in tech has business in China. It's where the growth is.
So if we see Broadcom's (AVGO) acquisition of Qualcomm (QCOM) be blocked because of worries by the U.S. government that Qualcomm is a crown jewel where its 5G technology can't be shared with China, don't we have to be worried that all of tech that wants to be big in China could be under pressure?
Further should we be concerned that the new Secretary of State, Mike Pompeo, has had a much harder line on China than the former Secretary of State Rex Tillerson?
That's what this market's saying today and I think the concern is real if there is follow-through.
But, there are two theories at play here. One is that the U.S. is very concerned about intellectual property going into Chinese hands. However, the other is that perhaps this is a lone case and that the president has no desire to stop commerce with China but to try to limit the amount of theft that he perceives occurs with our companies and the Chinese.
It's so easy to overreact to these kinds of things but they certainly DO make sense to react to.
That's why it is certainly reasonable to believe that tech should take a breather until we have more clarity.
It's ironic but the real story here might be what happens if Larry Kudlow becomes chief economic advisor. I think that while Larry's gotten tougher on China I know I would feel better about tech if he got in because he wants to walk the fine line of having good business with China but not giving anything away to them.
It would be an excellent sign that the Committee on Foreign Investment in the United States will not stand in the way of all tech deals, something that's very important if the sector is going to get more lift.
But, again, it's too early to tell. Right now all we know is that if the Broadcom-Qualcomm shoot down is bigger than there could be a pause in a rally of pretty much epic proportions.
Too early to tell, nevertheless a decent concern until we know more about the president's next move on the topic.