Financial advisors wonder how the US-China relationship will impact investors in 2026

Heated rhetoric over tariffs kept trade relations and cross-border investment between the United States and China chilly in 2025.

Nevertheless, a recent warming in U.S.-China relations – including a Trump-Xi phone call highlighting “significant progress on both sides” and planned state visits next year - has raised optimism for investors focused on semiconductors and technology supply chains in 2026.

As to how advisors should position clients’ semiconductor and tech holdings amid a tentative U.S.-China thaw and ongoing Taiwan tensions, Mike Martin, vice president of market strategy at TradingBlock, recommends staying the course on any AI trades and positioning based on one’s beliefs in the companies, not the politics in the background.

“If the last few years have taught us anything, it is that policy shifts can be sudden and unpredictable, so timing them is impossible. Taiwan, of course, is an existential threat, but not an imminent one,” Martin said. 

Elsewhere, Sam Diarbakerly, founder and private wealth advisor at Generation Capital Advisors, points out that the U.S.-China backdrop will keep shifting so owning the broad market will protect investors from single-country or single-company bets.

“Semiconductors are still a secular growth story. But the risk is that investors over-concentrate in one name or one geography. The index solves this by letting market cap do the work,” Diarbakerly said.

He also recommends avoiding narrow or equal-weight strategies. In his view, they “sound diversified but actually dilute exposure to the real winners in AI and chips.” In this environment, he believes the natural momentum of market-cap weighting works best.

Moving on, Austin Graff, chief investment officer at 49 Financial, notes that geopolitical risks highlight the importance of diversification as overexposure to binary geopolitical events can add unnecessary idiosyncratic risk to portfolios. 

“Excessive exposure to these risks can lead to clients not achieving their financial goals, which is our main priority in creating portfolios for clients,” Graff said.

Then again, even with a bit of U.S.-China thawing, semiconductors and AI remain strategic chokepoints, according to Sean Beznicki, director of investments, VLP Financial Advisors. As a result, he’s not positioning clients as if the rivalry is fading.

Diversification now, in his opinion, means not betting the whole tech sleeve on one country or one supply-chain link, and using any good-news rallies to rebalance back to safer, more globally spread exposure.

“We continue to view core AI exposure positively particularly the cash rich hyperscalers, while leaning into diversified ‘picks-and-shovels’ like equipment and platforms with global demand. Markets may still be underpricing how fast policy can swing as export controls and licensing can tighten overnight, so we remain focused on valuation discipline, strong balance sheets, and companies able to reroute supply or redesign products to stay compliant,” Beznicki said.

Changing for China?

Martin, for one, does not believe that U.S. and China trade relations should change one’s investment strategy in any sector, including tech and emerging markets.

“In the short term, you can expect higher volatility, but that is not necessarily a bad thing. A well-diversified portfolio has exposure to different regions and sectors regardless of the political noise or anticipated volatility,” Martin said.

Similarly, 49 Financial’s Graff points out that diversification will always be the best way to protect clients from adverse outcomes associated with trade agreements. 

“The current environment impacts how we think about diversification, but not if we diversify,” Graff said. 

Stressed Graff: “We prefer to focus on underlying business drivers when thinking about diversification and have diversifying beyond the names that have dominated returns for the last decade or so.  The benefits are more predictable fundamentals and reasonable valuations – core characteristics for client portfolios that never goes out of style.”