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The Big Tech trade was alive — and well, even — before the announcement of a temporary deal with China.
After a dramatic trade reset, easing some of the worst supply chain fears, the once-hot tech trade, which turned into the safest trade, is even more back to being both.
Negotiations between the US and China yielded a 90-day pause, removing the sharpest fangs from tariffs the rival nations set on each other and charting a trajectory away from the worst outcomes of an escalating trade war. The stock market celebrated the lower chances of a global recession and Chinese-American splintering, with the S&P 500 (^GSPC) surging 3.2%.
But tech investors especially rejoiced, and the megacap tickers continue to outperform through this uncertain phase of piecemeal trade diplomacy.
"With US/China clearly on an accelerated path for a broader deal we believe new highs for the market and tech stocks are now on the table in 2025 as investors will likely focus on the next steps in these trade discussions which will happen over the coming months," said Wedbush analyst Dan Ives in a note on Monday.
The bulls are back.
The risks of a prolonged conflict with China to Magnificent Seven members have been weighing on investors, from the loss of Chinese advertisers (Meta, Google, Amazon) to sourcing, manufacturing, and sales disruptions (Tesla, Apple, Nvidia, Amazon — again). Plus the second, third, and fourth-order effects from customers becoming trade war casualties.
Ives said the baseline view heading into the weekend was some deescalation between Beijing and Washington. But the outcome, far exceeding expectations, he called a "dream scenario."
But there are other considerations.
Similar to Trump's first post-"Liberation Day" deal with the UK, the easing of tariffs, while meaningful, doesn't address underlying tech industry trade issues. In China's case, those include chip restrictions, AI, and granting American companies greater access to their markets.
There's also the state of the Mag Seven stocks themselves. As a group, they are still way off their highs from earlier this year. Still, investors have benefited relative to the broader market by holding these names, highlighting their newfound defensive aspect.
Microsoft on Monday set a new closing high for 2025. And most of the names have posted significant gains since the 90-day global tariff pause, lifted by impressive quarterly reports and a rapprochement with China.