The intensifying pressure by the US government on Huawei has taken a toll on the tech sector as stocks fell Monday following the ban issued by Google on the company’s use of the Android operating system.
The Dow Jones Industrial Average declined by 45 points as Apple lagged. The S&P 500 pulled back 0.4%, with the tech sector dropping 1.3%. The Nasdaq Composite fell 1%.
Google has banned the China-based company from using the Android operating system after the Alphabet has revoked Huawei’s license. The search giant’s decision against Huawei follows the intensified crackdown of the U.S. government on Chinese telecom companies and the executive order released by President Donald Trump.
While the status of Huawei remains in limbo until the company can figure out what to do following the Google/Android ban, the investors have grown weary on the security of the entire technology sector as Huawei is one of the most prominent players currently.
“If this remains enforced, it’s going to create some opportunity, but companies are working with their compliance departments to get out of the way of this Huawei situation,” said Quincy Krosby, chief market strategist at Prudential Financial. That’s difficult because “Huawei has its tentacles in so many parts of the technology sector. That’s why this is not a one-day event.”
Huawei’s competitor, Apple, has also suffered a drip in its trading, sliding more than 3% after an HSBC analyst cut down its price target citing the ongoing drama in the tech world.
“A trade war would hammer the U.S. and global growth, with obvious implications for asset allocation, equity sectors, and the dollar,” said Chen Zhao, chief global strategist at Alpine Macro, in a note. “But that outcome is plastered all over the headlines. Forgotten is that there are also upside risks for the U.S. economy.”
As long as the technology sector can remedy the situation, forecasts suggest that the dip will continue and could impact even the most influential players in the industry.