In a note to investors, Wedbush Securities analyst Dan Ives said the "biggest policy risk" for tech stocks over the past year has been U.S.-China tensions, putting Apple, semiconductor companies and 5G providers at the forefront of the battle. If the Biden administration does not take the same stance toward the world's most populous country that the Trump administration has had, it could be a "major bullish sign," Ives pointed out.
"Based on policy platforms, the Street's view appears to align with our outlook that a Biden Presidency will take a much more friendly tone on China technology and policy issues which could ratchet down tensions and rhetoric between the US/China potentially slowing down the decoupling of the world's largest economies," Ives wrote in his note to investors. "While long standing issues around piracy and IP theft are not going away, this result would be a major bullish sign for the likes of Apple, Cisco, and semi names still caught in the crossfire on this ongoing US/China Cold Tech War with 5G front and center."
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It would be especially bullish for Apple, with Ives describing it as "the poster child" for the ongoing trade tensions between the two countries, given that China manufactures the vast majority of Apple's iPhones and accounts for a good percentage of its sales.
"[Tim] Cook & Co. are focused most around the supply chain given the company has 'bet the farm' on its Foxconn factory as it represents the hearts and lungs of the Cupertino iPhone franchise," Ives added. "With Biden taking the reigns in the Beltway we believe Apple diversifying out of China is essentially off the table, although we could see new pockets of manufacturing in Vietnam over the next year."
In the company's most recent quarter, Greater China – which includes China, Hong Kong and Taiwan – accounted for $7.9 billion of its $64.7 billion in revenue.
Apple is slated to report fiscal first-quarter earnings on Jan. 27 after the market closes.
For semiconductor companies, any potential rewards from changes in policy could be more muted, as Ives does not expect a Biden administration to "quickly back away" from restrictions on Huawei or other Chinese companies.
However, the risk that additional restrictions are placed on another Chinese tech company is lessened with Biden in office.
"We do see some possibility that restrictions are eventually loosened with regards to SMIC, Huawei, etc., a result that could create winners (semicap equipment, substrate, wafers, certain component suppliers) while pressuring players who have benefitted from share shift away from China's 'Champions,'" Ives added.
For Cisco and other 5G infrastructure providers, the battle over where 5G's foundation is built "will likely remain a contentious point," Ives said. However, there may be an olive branch put forth by Biden to Chinese President Xi Jinping during Biden's first 100 days that could help "set a friendlier tone" between the two countries.