Tech stocks are heavily exposed to China, which could put gains at risk, according to Piper Sandler. S & P 500 large-cap companies have a near-record reliance to sales in China at a time when the country is still contending with a slump in the real estate industry, as well as a greater push by Beijing to buy domestic, the firm's chief global economist Nancy Lazar wrote in a Wednesday note. Tech companies are especially vulnerable to any weakness in China, with semiconductor businesses notably generating more than 30% of their sales in the country, the note read. Earlier this month, for example, The Wall Street Journal reported China is ordering its largest telecommunications carriers to halt the use of foreign chips. In April, the VanEck Semiconductor ETF (SMH) has dropped about 7%, underperforming the S & P 500's more than 3% decline during the same period. Shares of Advanced Micro Devices and Intel have plunged more than 15% and 21%, respectively, this month. “S & P large caps have near-record exposure to a China that is wobbly economically, with an increasingly authoritarian Heavy Hand of regulation,” Lazar wrote Wednesday. “Some sectors/companies look particularly vulnerable.” Investor concerns are increasing as the world's second-largest economy deals with the fallout from a correction in the property sector, which once accounted for roughly one-fifth or more of the Chinese economy. The Shanghai Composite is down 7% over the past 12 months. This year, the index is higher by roughly 2%. S & P Global Ratings this week noted the country could be in for a new wave of bond defaults that could come as soon as next year, further fueling those worries. — CNBC's Evelyn Cheng contributed to this report.
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