What Happened?

Shares of power management chips maker Monolithic Power Systems (NASDAQ:MPWR) fell 8.6% in the pre-market session after China imposed a 34% tariff on all U.S. imports amid escalating trade war tensions. This was especially rough for the US chipmakers because a big chunk of their business leans on demand out of China. The new tariffs not only threaten to erode profit margins but also risk reducing market share. Adding to the uncertainty, the Trump administration signaled the possibility of further regulatory action against the sector. Although semiconductor firms were notably excluded from the broad tariffs unveiled on April 2, 2025, their exclusion raised concerns that targeted restrictions could still be forthcoming.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Monolithic Power Systems’s shares are extremely volatile and have had 30 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 9 days ago when the stock dropped 6.3% on the news that stocks pulled back (Nasdaq -1.5%, S&P 500 -1.2%) amid fresh concerns about trade tariffs. The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela. For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions. 

Adding to the market unease, the President announced plans for new tariffs on auto imports before the planned "reciprocal" tariffs on April 2, 2025. There were also reports that the U.S. had added more Chinese companies to its trade blacklist, citing national security concerns. As a result, these companies would now need government approval to purchase American technology. Among those affected were tech firms that depended heavily on advanced chips made by U.S. manufacturers, raising concerns about the US chip makers' ability to maintain strong sales in the Chinese market.

Monolithic Power Systems is down 19% since the beginning of the year, and at $481.04 per share, it is trading 49.2% below its 52-week high of $947.16 from August 2024. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $2,830.

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