Shares of Applied Materials and Lam Research were both higher in late morning trading.
The run in both is in part encouraged by strong earnings from Lam Research that surprisingly noted strong performance in China despite headlines focused on macro pressures.
"We continue to see strength in the China region with 25% of our revenue being generated there. The strength in China came from both foundry as well as memory," Lam CEO Martin Anstice said on Tuesday's earnings call. "Nearly two thirds of the revenue in September came from domestic Chinese customers."
The growth in China reflects strong demand in the country from U.S. suppliers despite the obvious animus between the Trump and Xi administrations.
Anstice emphasized that the long term opportunities available in next generation devices and systems outweighs the short term risks.
"There has been more semiconductor capital investment volatility both upside and downside in 2017 and 2018 than in the recent prior years and that is only extenuated by broader macro headlines such as trade, tariffs and interest rates," Anstice explained. "Despite this context, we remain very excited by the long-term drivers for data economy enablement from the world of silicon and the complements of our products and services portfolio to the technology roadmap of the industry."
The ability to still scale takes some of the pressure off of the world's largest semiconductor equipment company, Applied Materials, which drew 39% of its sales from China in the second quarter. Chinese consumers were its largest growth engine in the quarter as sales to China increased by almost $1 billion year over year.
Understandably, tariffs have significantly added to the already existing apprehension about inventory.
"The rise of the semiconductor industry in China need not be viewed simply as a threat to the world; instead, it is a significant growth driver and business opportunity for global suppliers," Lung Chu, president of SEMI, a semiconductor supply chain advocate association, said in a recent report.
The report, titled China's Semiconductor Industry and Win-Win Growth, explains that the companies will continue to benefit as China grows its semiconductor consumption ramps up to over $200 billion in the near term and on to $305 billion by 2025.
To be sure, as pricing slowdowns and possibly increased tariffs come into focus, analysts are still advising caution. A 25% tariff tacked on to goods would almost certainly make Chinese consumers look to companies like Samsung (SSNLF) or SK Hynix (HXSCL) in Korea to help supply the ramped up in demand.
Shebly Sarafi, Managing Director of Internet and Technology Research at FBN Securities noted that exposure to China should not be viewed as a growth engine in the near term.
"We do see some risk to the forecast, particularly as LRCX has exposure to semiconductor sales being negatively impacted by trade and tariff issues with China as well as a decline in DRAM prices," Sarafi reasoned.
His critique of course applies to AMAT as well, given their large exposure to the country.
Still, as Lam shows that tariff pressures can indeed be overcome and consumption even builds amid the tariff headlines, there is hope that AMAT can at least avert one primary pressure point for the time being.