Stocks started the day lower on Friday morning after President Trump told reporters that the U.S. will not do business with Huawei and is not yet ready to strike a trade deal with China.
The Dow traded -0.8% lower, the S&P 500 fell -0.9%, and the Nasdaq sank -1% early in the trading day, with chip stock names like Micron (NASDAQ: MU) and Skyworks Solutions (NASDAQ: SWKS), which were both down nearly -4% at the time of this writing, leading the market lower.
But as the trade war heats up and the technology stocks sink lower, there are four stocks in the sector that are emerging as safe havens amid all the market turmoil.
Heavy hitters like Carl Icahn are turning to enterprise software names like Cloudera (NYSE: CLDR), Microsoft (NASDAQ: MSFT), Salesforce (NYSE: CRM), and Twilio (NYSE: TWLO) as these companies don’t rely as much on supply chains and manufacturing and thus aren’t as impacted by the trade war as the rest of the sector.
While these names aren’t entirely “tariff-proof,” they could hold up better than consumer technology companies that manufacture products in China, according to D.A. Davidson senior research analyst Rishi Jaluria.
“They’re a safe haven right now,” Jaluria said. “Software names are not exactly recession proof, but they’re more resilient to downturn.”
One ominous reason is the strong dollar.
The S&P 500’s technology sector—which does not include big names Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB), and Google-parent Alphabet (NASDAQ: GOOGL, GOOG)—is the most international of any other sector in terms of revenues, according to DataTrek Research, with 58% of sales coming from outside the U.S., compared to 39% for the S&P 500 overall. Materials is the only other sector that receives more than half of its revenue from overseas.
“That means global slowing hurts the sector more than the average S&P company,” DataTrek’s Nick Colas said.
And while Newton Advisors’ Mark Newton is bearish on the tech sector and recommends taking profits and getting out of most popular tech stocks, he said that “enterprise software is the standout that’s still resilient.”
Of these four stocks, Wedbush Securities managing director Dan Ives likes Microsoft.
“We believe large cap Microsoft is a compelling name to own with negligible China exposure and overall the software sector we would be buying here as it is primarily immune from the trade war,” Ives said.
Carl Icahn recently revealed a new stake in Cloudera, which has sent the stock surging more than 35% over the past month after hitting a bottom earlier this summer. The billionaire investor said on Thursday that, while he’s far from bullish on the broader market, Cloudera looks like an opportunity.
“There’s certainly some very interesting opportunities, but you have to worry about a full-scale recession,” Icahn said. “Cloudera is undervalued.”