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Investing.com - A rebound in tech stocks following U.S. President Donald Trump's decision to pause his massive "reciprocal" tariffs could have "more room to run" based on similar rallies in the past, analysts at UBS said.
The main averages on Wall Street logged sharp gains on Wednesday after Trump announced his sudden tariff reprieve, with the Nasdaq Composite surging by 1,857 points, or 12.2%.
In a note to clients, the analysts at UBS said the recovery in the tech-heavy index tracks a bounce back in 2018-2019, when it logged a peak-to-trough decline of 24%.
"While there is still uncertainty around mainland China-based tariffs, if history is a guide, diminishing tariff uncertainty can offer solid recovery opportunities in beaten-down quality [artificial intelligence] companies," the analysts said.
In particular, they said that mega-cap tech names -- such as Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), Google-owner Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Facebook-parent Meta Platforms (NASDAQ:META), and Microsoft (NASDAQ:MSFT) -- will "get bigger" in the AI era and will remain "best in class."
They added that, although their AI portfolio has diversified its exposure across several industries, they continue to highlight an "offensively defensive" strategy, "with a focus on semiconductors [...] and software and internet."
The comments come after Trump abruptly revealed a reversal of most of his punishing and sweeping tariffs on a host of countries, saying he would pause them for 90 days. However, he said in a social media post that these nations would still face a "substantially lowered Reciprocal Tariff" of 10%.
Crucially, the halt did not apply to China, long the main focus of Trump's trade-related ire. Instead, he said he would lift the tariffs on Chinese imports to a staggering 125% -- a move that came after Beijing raised its own duties on incoming U.S. products to 84%, intensifying a trade war between the world's two largest economies. China was the second-biggest source of U.S. imports last year.
"[I]nvestors should not be too complacent as mainland China based tariffs will still weigh on tech earnings if they are long lasting," the UBS analysts said.
Explaining his stunning about-face to reporters, Trump, who had previously insisted that his elevated tariffs would remain in place and told Americans to "BE COOL!" despite recent financial market ructions, said that people were "getting yippy."
Nasdaq 100 futures retreated on Thursday. Bond yields also ticked lower following a steep sell-off in U.S. government debt that Trump appeared to cite as one motive for his decision to delay the tariffs.