As one would expect, shares of ZTE's U.S. optical component suppliers rose sharply after President Trump signaled that a deal to end a recently-imposed ban on U.S. parts sales to the Chinese phone and telecom equipment giant is in the works. And NXP Semiconductors (NXPI) posted a double-digit gain after Chinese regulators (probably not coincidentally) announced that they're restarting their review of Qualcomm's (QCOM) $44 billion deal to buy the Dutch chipmaker.
But the broader easing of trade tensions between the world's two biggest economies -- Chinese Vice Premier Liu He arrives in Washington on Tuesday for trade talks, and both U.S. and Chinese officials are at least saying the right things about openness to a deal -- has positive implications for plenty of other tech companies.
With the Trump Administration having made intellectual property protection a major sticking point as it floated tariff proposals aimed at Chinese tech, electronics and industrial equipment suppliers, software vendors and patent-licensing firms could benefit from a trade compromise. Microsoft (MSFT) , which has long complained about the impact of piracy on its Chinese Windows and Office sales, certainly wouldn't mind a trade deal that featured a commitment by Beijing to make greater efforts to crack down on IP theft. Qualcomm, for its part, would benefit if a deal made it easier for the company to resolve its patent-licensing spat with Huawei (the companies were reported in March to be in settlement talks).
U.S. enterprise IT giants, many of whom saw their Chinese sales fall sharply in 2013 and 2014 following the NSA spying scandal, would no longer have to worry about the possibility that a trade war will lead Beijing to once more pressure local enterprises and government agencies not to buy from them. And the likes of Cisco Systems (CSCO) and Juniper Networks (JNPR) wouldn't need to worry about China responding to Washington's actions against ZTE with retaliatory measures against U.S. telecom equipment suppliers.
Likewise, Apple (AAPL) and other major U.S. consumer brands with significant Chinese exposure won't have to worry about dealing with consumer boycotts sparked by a trade war. Past boycotts of South Korean and Japanese goods -- at times encouraged by local media -- have taken a harsh toll on the sales of exporters.
And it's certainly hard to overlook the potential impact of a trade deal on the tech M&A environment. Especially for the chip industry, which has seen a tremendous amount of consolidation since 2013. China's reluctance to sign off on either the Qualcomm/NXP deal or Toshiba's $18 billion deal to sell its flash memory unit to a Bain Capital-led group, in spite of both deals having won needed approvals elsewhere, has had a chilling impact on the chip M&A environment.
Marvell Technology (MRVL) and Cavium (CAVM) both posted large gains on Monday, as investors wagered Marvell's $6 billion deal to buy Cavium is now less likely to be blocked by Beijing. Broadcom (AVGO) , which has bought plenty of chipmakers over the last few years and has indicated it's open to making smaller deals after seeing the Trump Administration shoot down its hostile bid for Qualcomm, also has to be pleased at the possibility that Beijing won't act as a deterrent to chip industry dealmaking going forward.
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Jim Cramer and the AAP team hold positions in Microsoft and Apple for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells MSFT and AAPL? Learn more now.