As a result of China’s intentions to extend a ban on the use of iPhones to government-backed agencies and state-owned businesses, Apple shares plummeted on Thursday, threatening to wipe out $200 billion of market value in just two days.
The Cupertino, California-based company’s stock dropped as much as 5.1%, bringing its two-day decline to 6.8%. Apple is the largest component of main US equity indexes, contributing to a broader selloff triggered in part by China’s myriad problems.
The second-largest economy in the world has been in decline due to a protracted real estate market crisis, jeopardizing demand for everything from commodities to consumer electronics. China is the iPhone manufacturer’s largest foreign market and global production base.
In addition to Apple’s woes, rising US Treasury yields are causing bonds to sell off due to concerns that the Federal Reserve will have to intensify its fight against inflation as the US economy remains resilient.
The news has a wide-ranging impact on the markets, with investors selling chips, mega-cap technology, and US-listed Chinese equities.
Edward Moya, a senior market analyst at OANDA, remarked, “The Nasdaq is falling as a handful of mega-cap technology stocks are dragged down by one bad Apple.” “Apple’s growth story is heavily reliant on China, and if Beijing’s crackdown intensifies, it could pose a significant problem for a large number of other mega-cap technology companies that rely on China.”
On Thursday, the tech-heavy Nasdaq 100 Index was down approximately 1%, while the Philadelphia Semiconductor Index, which includes several Apple suppliers, was down 2.5%.
Interesting Timing
Huawei’s Mate 60 Pro is powered by Semiconductor Manufacturing International Corp.’s 7nm chips, according to an analysis conducted by TechInsights for Bloomberg News. This suggests that Beijing appears to be making early progress in a nationwide effort to circumvent U.S. efforts to contain its ascent.
If Beijing follows through with a prohibition, the unprecedented blockade could also affect a number of other U.S. technology firms that rely on sales and production in China. Apple suppliers traded lower across all continents on Thursday as multiple reports confirmed China’s most recent changes.
However, bullish analysts such as Daniel Ives of Wedbush Securities believe the impact of an iPhone prohibition is grossly exaggerated, as it would affect less than 500,000 iPhones of the approximately 45 million he anticipates will be sold in the United States over the next 12 months.
Ives, who has an overweight recommendation on the company, wrote in a note, “Despite the loud noise Apple has seen massive share gains in China smartphone market.”
