What Happened?
A number of stocks fell in the afternoon session after President Donald Trump threatened to impose 'massive' new tariffs on Chinese goods, a response to Beijing's decision to tighten export controls on rare earth metals.
The escalating trade friction sent shockwaves through the market, with the PHLX Semiconductor Index (SOX) falling 4%. The move from China involves expanding restrictions on several rare earth elements, which are critical components for a wide range of high-tech products, including semiconductors. President Trump's retaliatory tariff threat intensified investor concerns about potential supply chain disruptions and increased costs for chipmakers. This geopolitical tension has created significant uncertainty, leading to a broad sell-off in the tech sector and pulling down major indexes like the S&P 500 and Nasdaq.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Semiconductor Manufacturing company Semtech (NASDAQ: SMTC) fell 4.3%. Is now the time to buy Semtech? Access our full analysis report here, it’s free for active Edge members.
- Semiconductor Manufacturing company Nova (NASDAQ: NVMI) fell 2.7%. Is now the time to buy Nova? Access our full analysis report here, it’s free for active Edge members.
- Processors and Graphics Chips company Lattice Semiconductor (NASDAQ: LSCC) fell 4.9%. Is now the time to buy Lattice Semiconductor? Access our full analysis report here, it’s free for active Edge members.
- Analog Semiconductors company Himax (NASDAQ: HIMX) fell 5.4%. Is now the time to buy Himax? Access our full analysis report here, it’s free for active Edge members.
- Processors and Graphics Chips company Penguin Solutions (NASDAQ: PENG) fell 3.8%. Is now the time to buy Penguin Solutions? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Himax (HIMX)
Himax’s shares are extremely volatile and have had 43 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 6.3% as AMD's deal with OpenAI intensified the ongoing AI frenzy that has powered the market. The positive momentum was linked to an announcement that AMD and OpenAI entered into an agreement to power OpenAI's AI infrastructure with AMD's Instinct GPUs. This significant deal underscored the massive demand for advanced chips needed for artificial intelligence applications. The development occurred as the U.S. semiconductor manufacturing industry was already experiencing rapid growth, fueled by AI-driven demand and government support from initiatives like the CHIPS and Science Act.
Himax is up 11.7% since the beginning of the year, but at $8.36 per share, it is still trading 35% below its 52-week high of $12.85 from January 2025. Investors who bought $1,000 worth of Himax’s shares 5 years ago would now be looking at an investment worth $2,234.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
