Major Stocks Having Big China Problems – AAPL, CAT, NVDA
Major stocks are having big China problems. Speculation over U.S.-China trade negotiations drags on and China is showing clear signs of a slowdown in economic growth. As a result, companies that rely significantly on revenue from the world’s second largest economy have been feeling the pain.
Stocks Hit by China Problems
The latest victims to succumb to their China problems have been Nvidia (NVDA) and Caterpillar (CAT). Both of these companies announced on Monday that declining China demand is substantially impacting revenues.
But China-related revenue concerns are not new. In early January, Apple (AAPL) CEO Tim Cook sent a letter to investors lowering the company’s revenue forecast on weak China demand. This prompted a large, one-day gap down for AAPL stock.
The chart above shows the downward trajectories and dismal one-year performance figures for all three stocks (as of the market close on Monday, January 28, 2019).
Nvidia Sees ‘Deteriorating’ China Economic Conditions
Well ahead of Nvidia’s mid-February earnings release (check out our Market Events & Earnings Calendar), the high-profile semiconductor company lowered its fourth-quarter revenue guidance on Monday. This was due to ‘deteriorating’ global economic conditions, especially in China. NVDA stock plunged more than 18% at one point on Monday before paring some of its losses.
Caterpillar Sees ‘Lower Demand in China’
For its part, construction equipment maker Caterpillar specifically cited “lower demand in China” in its Monday earnings release as a key reason for disappointing overall sales. CAT stock fell nearly 10% on Monday.
U.S.-China Trade Negotiations
What seems to have become a disturbing trend for U.S. companies doing significant business in China may have just gotten even worse. The White House announced on Monday that its key trade advisor and well-known trade hawk Peter Navarro will be one of the main U.S. negotiators in trade talks with a Chinese delegation this week. Navarro is a notorious hardliner on trade issues, particularly when it comes to China. In December, Navarro rocked the markets when he said “China is basically trying to steal the future of Japan, the U.S., and Europe.”
While Navarro’s presence at the negotiating table may be problematic, though, China’s ongoing economic slowdown is even more pressing for many U.S. companies. And this may be the primary reason that U.S. companies tied closely to the China market will find it difficult to rebound in the near-term.
IMPORTANT: The information above should not be construed as investment advice and should not be considered as a solicitation to buy or sell securities. Trading and investing in the financial markets involves substantial risk of loss, and may not be suitable for all investors.
Disclosure: At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company whose stock may be mentioned.
Chief Market Strategist at The Technicals
With more than two decades of experience as an equity analyst for several major research firms, Don has covered individual stocks (both technically and fundamentally) across a wide variety of sectors and industries, including tech, financial, and retail. He has been quoted regularly in key financial media like Bloomberg and Reuters. Contact Don