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Why United Microelectronics Stock Is Skyrocketing Today

By Chris Neiger – Sep 28, 2020 at 12:43PM

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The U.S. government is targeting one of United's rivals.

What happened

Shares of United Microelectronics (UMC -0.07%) are spiking today as investors reacted to the news that one of United's rivals was hit with new U.S. restrictions. 

United Microelectronics' stock rose by as much as 16.5% today, and was up 15.6% as of 12:13 p.m. EDT.

So what 

The U.S. Commerce Department said U.S. chip companies exporting technology to Semiconductor Manufacturing International -- China's largest chipmaker -- have to first get special licenses to do so. The U.S. government is adding an extra level of scrutiny of Semiconductor Manufacturing because it says the company's technology could be used by the Chinese military.

A white arrow above a bar chart.

Image source: Getty Images.

United Microelectronics is a competitor of Semiconductor Manufacturing and investors may be hoping that if the U.S. continues to increase restrictions on the Chinese company then it could help boost United's chip market share. Investors are pushing up the company's stock as a result.

Today's share price jump added to several months' worth of gains, and United Microelectronics' stock is up 82% year to date.

Now what 

Tensions between the U.S. and China have been ratcheting up recently and today's news is just the latest example. United Microelectronics could benefit from all of this, but investors should be careful not to trade the stock based on daily news. There's nothing set in stone about the current export restrictions, nor is it a guarantee that Microelectronics' business will immediately benefit from the restrictions placed on its rival.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

United Microelectronics Stock Quote
United Microelectronics
$7.39 (-0.07%) $0.01

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