What Happened?
Shares of power management chips maker Monolithic Power Systems (NASDAQ: MPWR) fell 6.3% in the afternoon session after stocks pulled back (Nasdaq -1.5%, S&P 500 -1.2%) amid fresh concerns about trade tariffs. The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela. For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions.
Adding to the market unease, the President announced plans for new tariffs on auto imports before the planned "reciprocal" tariffs on April 2, 2025.
There were also reports that the U.S. had added more Chinese companies to its trade blacklist, citing national security concerns. As a result, these companies would now need government approval to purchase American technology. Among those affected were tech firms that depended heavily on advanced chips made by U.S. manufacturers, raising concerns about the US chip makers' ability to maintain strong sales in the Chinese market.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.
What The Market Is Telling Us
Monolithic Power Systems’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 5 months ago when the stock dropped 24.9% on the news that Edgewater Research analysts revealed that the company's (MPWR's) allocation to Nvidia's Blackwell line of GPUs was "at risk."
The analysts added, "We hear NVDA will go through their confirmed orders to MPWR for the next few quarters, but we hear NVDA has canceled half of MPWR's backlog, cutting all of their unconfirmed orders."
Edgewater Research noted that the root cause of MPWR's issue was "unclear" but could be related to some product issues identified earlier in the year.
As a result, the analysts felt the situation created a risk to MPWR's business, especially its Enterprise data segment, given investors' high hopes for the company's AI capabilities.
Monolithic Power Systems is up 1% since the beginning of the year, but at $599.78 per share, it is still trading 36.7% below its 52-week high of $947.16 from August 2024. Investors who bought $1,000 worth of Monolithic Power Systems’s shares 5 years ago would now be looking at an investment worth $3,434.
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