Semi stocks are having flashbacks to their May sell-off.
The SMH semiconductor ETF has fallen more than 4% this week, its worst since the middle of a spring slump. The latest round of selling on Thursday came after President Donald Trump announced via Twitter that an additional 10% of tariffs on Chinese goods would go into effect September.
"All it takes is one tweet to derail two months of positive momentum,"Â Mark Tepper, president of Strategic Wealth Partners, said on CNBC's "Trading Nation" on Thursday. "Within the sector, there's some companies that are crushing it, some companies are whiffing, so you need to be selective."
The broader chip space's sell-off could bleed into the rest of the market, warns Matt Maley, equity strategist at Miller Tabak.
The semis are "a great leading indicator for the entire market, but the last two years have been particularly so where it topped off before the rest of the market did last year, and then it led the market higher in the first-half rally this year," said Maley.
Thursday's breakdown in the chipmakers caused critical damage to the technical charts, he added.
"It was testing its trend line from the June highs. But, now it's broken below that," said Maley. "If we go a lot lower from here, the momentum is going to take over, and it's not going to be good for the group, or for the market in general. We've still got a month to go before these tariffs are imposed, but we'll see what happens — this is definitely a concern."
One semis stock could offer a long-term hedge against any macro and sector headwinds, Tepper added.
"The way we like to play this is to find a company that has exposure to all those highest growth-end markets we want to play — [artificial intelligence], autonomous vehicles, gaming, data center — and that company is Nvidia," said Tepper.
Nvidia could play catch-up to the rest of the space after severely underperforming in the past 12 months, he said. The stock is still 44% off its October record and has fallen 33% in the past year as the SMH ETF has risen 8%.
"It got whacked because of some crypto exposure, but that's all behind them. It's just over $160 right now. So, I think there is some upside from here," said Tepper.
Disclosure: Strategic Wealth Partners owns shares of NVDA
