Wall Street rallied for a second consecutive day on Wednesday, driven by signs of easing U.S.-China tensions and Trump’s assurance of not removing Federal Reserve Chair Jerome Powell.
The technology sector led the rally with the "Magnificent Seven" firms collectively adding $455 billion in market value. Roundhill Magnificent Seven ETF MAGS jumped 6.7% in the past couple of days while MicroSectors FANG+ ETN FNGS climbed 6.2%.
Roundhill Magnificent Seven ETF is the first-ever ETF that offers investors equal-weight exposure to the “Magnificent Seven” stocks. MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar-weighted index designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies.
Tesla (TSLA) led the charge on Wednesday, climbing more than 5% after CEO Elon Musk revealed that his involvement with the Trump administration would be "significantly" reduced. NVIDIA (NVDA), Meta (META) and Amazon (AMZN) each gained around 4%, while Apple (AAPL), Alphabet (GOOGL) and Microsoft (MSFT) posted gains in the 2% range (read: Should You Buy Tesla ETFs Post Q1 Earnings Miss?).
President Donald Trump indicated a potential reduction in the steep tariffs imposed on Chinese imports. At a White House press conference Tuesday, Trump called the current 145% reciprocal tariffs "too high" and said they would "come down substantially."
Treasury Secretary Scott Bessent echoed the sentiment, stating that the tariff standoff with China is "unsustainable" and expressed confidence that a deal between the two nations could eventually be reached. A Wall Street Journal report further intensified the situation, revealing that U.S. officials are considering reducing tariffs on China to 50–65% but are depending on China to lower its trade barriers.
Trump, who criticized Powell by calling him a “major loser,” clarified that he had no plans to oust him before his term ends in May 2026.
A de-escalation of the trade war would likely benefit tech firms heavily reliant on Chinese manufacturing and consumer markets. Wedbush analyst Dan Ives noted that about 90% of Apple’s iPhones are manufactured in China, which accounted for 17% of the company’s revenues in 2024. Meanwhile, Tesla sources many of its parts and batteries from China and faces stiff competition from domestic automaker BYD. The easing of U.S.-China tension will benefit Tesla.
Amazon, too, has significant exposure. Roughly 30% of goods sold on the platform originate in China, and Chinese advertisers made up 14% of Amazon’s ad revenues in 2024, according to Raymond James. Chinese advertisers also accounted for 11% and 6% of total ad spending on Meta and Google, respectively. DA Davidson analyst Gil Luria estimated that China represents between 20% and 40% of NVIDIA’s end customers, though he cautioned on the exact figures due to the company's revenue reporting structure.
Other technology stocks also saw smooth trading on Wednesday. Intel (INTC) rose 5.5% on the day following a Bloomberg report that the company has plans to lay off 20% of its workforce.
Super Micro Computer (SMCI) jumped 7.6% after announcing an expanded collaboration with Japanese tech giant Fujitsu, which will use a new Supermicro server in its large language model initiative. Meanwhile, Palantir Technologies (PLTR) rose 7.3% after revealing a partnership with defense contractor Northrop Grumman (NOC) to develop AI-powered combat vehicles.
Battleshares TSLA vs F ETF ELON soared 10.3% on Wednesday. AI ETFs like KraneShares Artificial Intelligence and Technology ETF AGIX gained 5.3% while semiconductor ETFs like VanEck Fabless Semiconductor ETF SMHX and Invesco Dynamic Semiconductors ETF PSI were up more than 4% (read: 3 Tech ETFs on Sale Now).
Though the artificial intelligence (AI) trade has cooled off significantly this year, its adoption will again provide a lift to tech stocks. The expansion of AI applications holds the promise of ushering in fresh opportunities for growth within the sector. Tech companies have poured billions into data centers and AI chips to support the growth of AI models.
The global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping, thereby building the strength in the sector. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Further, the tech sector continues to be a significant growth driver of the first-quarter earnings season. The sector’s earnings are expected to be up 11.8% from the same period last year on 10% higher revenues. This will mark the seventh consecutive quarter of double-digit earnings growth and follow the sector’s 26.4% earnings growth on 11.4% higher revenues in the fourth quarter of 2024. The double-digit earnings growth is expected to continue in the next quarter, though the estimates came down to 11.5% from 14.2% projected on April 2.
If these were not enough, the technology sector has a solid Zacks Sector Rank, being in the top 44%. After a massive decline this year, the sector has become attractively valued with a P/E of 18.98% versus 17.65% for the broad market index.
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Invesco Semiconductors ETF (PSI): ETF Research Reports
MicroSectors FANG+ ETN (FNGS): ETF Research Reports
KraneShares Artificial Intelligence and Technology ETF (AGIX): ETF Research Reports
VanEck Fabless Semiconductor ETF (SMHX): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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