What Happened?
Shares of power management chips maker Monolithic Power Systems (NASDAQ: MPWR) jumped 9.5% in the afternoon session after investors grew more optimistic that an escalating trade war with China could be avoided.
The stock's recovery followed a 5.1% fall during the previous trading session. That decline occurred after threats were made to impose 'massive' new tariffs on Chinese goods, which sent shockwaves through the market and caused the PHLX Semiconductor Index (SOX) to drop by 4%. The subsequent rebound in semiconductor stocks, including Monolithic Power Systems, was fueled by hopes that the trade friction would not worsen.
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What Is The Market Telling Us
Monolithic Power Systems’s shares are very volatile and have had 29 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 3 days ago when the stock dropped 5.1% on the news that 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.
Monolithic Power Systems is up 65.6% since the beginning of the year, and at $984.15 per share, has set a new 52-week high. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $3,120.
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