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Investing.com - A possible loosening in export curbs following talks between U.S. and Chinese officials this week is likely to give further lift to a recent rebound in technology stocks, according to analysts at UBS.
On Tuesday, Washington and Beijing reached a fresh deal to put their trade truce back on track after the marathon two-day round of negotiations in London.
While the announcement was short of particulars, U.S. Commerce Secretary Howard Lutnick did claim that there was a resolution to a Chinese move to cut off access to a handful of metals crucial for American industry and the U.S. military. Lutnick added that the White House’s response to the measures -- which have included their own controls on the export of semiconductor design software to China -- would be unwound in a "balanced" manner, but did not provide further specifics.
China’s Vice Commerce Minister Li Chenggang also noted that a "framework" deal had been forged in principle, and would now be brought to Trump and Chinese counterpart Xi Jinping for final approval.
"[A]ny easing of export controls, as a potential result of negotiations between the U.S. and China, would provide an additional boost [to tech stocks]," the UBS analysts said in note to clients on Tuesday.
The tech-heavy Nasdaq Composite has rallied by around 29% from recent lows touched after President Donald Trump’s aggressive tariff plans roiled markets in April -- one of the largest recoveries ever based on 60-day rolling returns.
Calling the rebound "one for the history books," the UBS strategists said the sector has been bolstered by "solid" artificial intelligence spending as well as signs of improvement in AI monetization.
However, despite these catalysts, the analysts flagged that investors "should not get carried away and ignore" near-term risks from lingering trade uncertainty, regulatory risks, and frothy tech valuations.
"[W]e recommend a more balanced positioning within tech," the analysts recommended, saying their AI portfolio included 22% exposure to semiconductor stocks, 22.5% to software names, 21% to hardware and IT services, and 34% to internet firms.