What does the repair of China-US relations under the relaxation of chip restrictions mean for US stocks?
The recent market theme has been the improvement in Sino-US relations. The resumption of sales of high-end AI chips from the US to China has brought significant incremental growth, directly boosting the valuation of the entire semiconductor sector. Companies like NVIDIA and AMD are direct beneficiaries, with greatly improved expectations. The biggest impact of this development is the increasing positive macroeconomic outlook.
For example, many were worried about the US debt crisis, but now no one mentions it. However, it's important to note that China is also a major holder of US debt. The relaxation of chip sales implies potential for more cooperation in other areas, including continued purchases of US debt to support its credit, as well as more room for imports, mitigating the negative impact of tariffs.
These factors are the underlying support for the growth momentum of US stocks. The earnings growth represented by semiconductors concretizes the huge potential of AI investments, and upcoming earnings reports from various firms will further strengthen this expectation.
The earnings report from Bank of America revealed rapid growth in US credit business since April, indicating steady economic growth. This growth, in turn, provides the Fed with reasons not to cut interest rates. Conversely, the fundamentals of US companies remain solid, and the focus now is on identifying which sectors are more profitable.
Yesterday, RGTI achieved 99.5% fidelity on a modular 36-qubit system, causing its stock to surge 30%. This exemplifies the allure of small-cap tech stocks—good news triggers a frenzy of capital inflows, much like how positive news about the stablecoin bill quickly drove up CRCL's price.
Therefore, in trading US stocks, if the overall market environment is favorable, acting quickly on good news can yield profits.
Today’s earnings announcement from TSMC has reignited the semiconductor sector. Yesterday, ASML’s earnings caused a significant drop, dragging down many semiconductor stocks. Some semiconductor companies, like Micron Technology, Marvell, and ALAB, had already adjusted earlier, indicating severe internal divergence within the sector.
Having held a significant position in semiconductors, my current task is to reduce exposure and shift to previously strong but now adjusted low-cap tech stocks—familiar names like APP, OKLO, TEM, and HIMS, as they can rise rapidly when market conditions permit.
Recently, drone-related stocks have surged due to support from the US bill, as have rocket-related concepts.
It’s evident that small-cap tech stocks in the US can skyrocket when the broader market rallies, which is why I prefer focusing on tech companies.
Given the current volatility, options trading is not advisable. Holding shares outright is sufficient to weather the storm of Trump’s tweets. Reducing trading frequency and staying steady can lead to rewarding gains.
2025 is bound to be a volatile year, requiring full digestion of the gains from the past two years. This demands higher personal trading discipline, so everyone should plan their portfolio management carefully. Those who prioritize strict discipline may consider joining our community.
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