Piper Sandler says tech companies have huge exposure to China, putting earnings at risk

Piper Sandler said technology stocks have significant exposure to China, which could put earnings at risk. S&P 500 companies’ reliance on sales from China is near an all-time high, at a time when the country is still dealing with a slowdown in its real estate sector and Beijing is ramping up purchases at home. Chief Global Economist Nancy Lazar wrote in a note on Wednesday. The report said technology companies are particularly vulnerable to the effects of China’s economic weakness, particularly the semiconductor business, which accounts for more than 30% of its sales in China. For example, earlier this month, The Wall Street Journal reported that China was ordering its largest telecom carrier to stop using foreign chips. The Vanek Semiconductor ETF ( SMH ) fell nearly 7% in April, dwarfing the S&P 500’s more than 3% decline over the same period. Shares of Advanced Micro Devices and Intel have fallen more than 15% and 21%, respectively, this month. “S&P large-cap exposure to China, where the economy is increasingly authoritarian, is near record levels,” Lazar wrote Wednesday, adding that “investors in the world’s second-largest economy are particularly vulnerable.” There is growing concern about the effects of the adjustment on the real estate sector, which once made up about a fifth or more of China’s economy. Over the past 12 months, the Shanghai Composite Index has fallen 7%. This year, the index is up about 2%. S&P Global Ratings added to these concerns this week by noting that the country could see a new wave of bond defaults as early as next year. —CNBC’s Evelyn Cheng contributed to this report.