The recent stock price action in the semiconductor space was in response to Donald Trump's comments that "I think, Taiwan needs to pay us for defence" and speculation that the US is looking at introducing additional semiconductor equipment trade restrictions to prevent ASML and Tokyo Electron from selling certain equipment to Chinese companies.
Far from a welcome return of Trump's geopolitical remarks, this is a new normal that we'll have to deal with as global investors. We're more concerned about the potential introduction of new tariffs on the auto market and an escalating trade war than his comments about Taiwan.
On the new semiconductor trade restrictions, at the end of the day it doesn't matter if the chips are made in China or elsewhere. What we do know is that capacity for semiconductors is very low, so if China is restricted, Taiwan, Korea, and Japan will need to step in and meet the demand. So new trade restrictions or not, it will not affect demand.
In addition, technology stock prices have been very weak for three days following the disappointing inflation data last week, as the market has rotated away from technology winners towards financials, housebuilders, small-cap companies, and laggards this year.
However, the fundamentals of our technology innovators continue to surge forward, with both TSMC and VAT Group reporting earnings:
- TSMC reported sales growth of 40% year-on-year for Q2, an incredibly strong number given it expected growth of 20% for 2024 only three months ago. It has also significantly hiked forward guidance for 2024.
- VAT Group, which provides valves to the semiconductor industry, announced that its order book has grown 73% year-on-year.
- Both companies' earnings highlight their strengthening fundamentals and the potential investment opportunity. This adds to the following key pieces of information from the last six weeks:
- Supply of Nvidia GPUs, high bandwidth memory, DRAM, and NAND is starting to get very restricted. We expect the industry to remain incredibly tight over the next two years, significantly benefiting our technology innovators building out the compute infrastructure for AI.
- SK Hynix and Micron have sold out of high bandwidth memory for most of 2025 already.
We believe this recent sell off could provide investors with an opportunity to buy into the Liontrust Global Technology Fund at an attractive price.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
The Funds managed by the Global Innovation Team:
May hold overseas investments that may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of a Fund. May have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on a Fund's value than if it held a larger number of investments. May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. May be exposed to Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. Do not guarantee a level of income.
The risks detailed above are reflective of the full range of Funds managed by the Global Innovation Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
