IT was not the worst performing sector yesterday, as the S&P 500 fell heavily again. Nevertheless, the 1.82% drop has helped pushed the IT sector down 2.29% so far this week, with only financials and energy falling more (-2.46% and -2.69% respectively). Both financials and oil companies face a raft of cost-cutting pressures in a mirror of the struggles that have hit retailers in recent years.
The IT sector will also face many challenges should Ms Warren prevail next November, with the larger companies coming under even more scrutiny. According to the latest polls, the US Senator has nearly closed the gap with Mr Trump. The more immediate threat is, of course, the current US President dragging the IT sector deeper into the trade war with China.
The trade spat is an undoubted negative for US equities. But it is important to remember: the big developments in the chip industry are being driven by a Dutch company (ASML) and TSMC (Taiwanese). The rapid shift to 7nm chips – confirmed in a statement by TSMC yesterday – has been highlighted as a crucial indicator before. The semi-conductor industry is migrating quickly to a smaller, specialist model of chips that will support a myriad of new, innovative applications.
Samsung has the capacity to produce 7nm chips for internal consumption too. President Trump can prevent US companies from trading with China, but he may struggle to stop critical advances in the semi-conductor industry that will underpin innovation – and growth.
