The Trump administration has made volatility great again.

President Trump late Thursday suddenly and quite unexpectedly announced another $100 billion in proposed tariffs against China. The Middle Kingdom fired back on Friday with angry vows to never back down. The markets reeled.

China is no innocent party. The Middle Kingdom has flouted international trade rules. But the question is, how best to meet the challenge? Economists are universal in their disdain of tariffs. Even if the proposed U.S. tariffs are a bluff to wring concessions from China, brinkmanship is a dangerous game.

All of these factors have weighed heavily on the stock market, especially the mega-cap tech companies that have driven the bull market. Through no fault of its own, Breakthrough Tech Profits holding Alphabet (NSDQ: GOOG) has suffered collateral damage.

Year to date, GOOG shares are down 1.97%, compared to a decline of 1.00% for the S&P 500 and a gain of 2.62% for the benchmark Technology Select Sector SPDR ETF (XLK), all calculated on a total return basis. Here’s my take.

The Headwinds of Trade War

The technology sector has not been immune from the turmoil over trade. The White House charges (rightfully so) that China pursues unfair trade practices, even outright industrial espionage. China is determined to steal intellectual property from America’s technology innovators. Trade measures against Chinese tech firms have resulted in tit-for-tat measures against U.S. companies.

In addition, tech stocks (including those in the BTP portfolio) remain under pressure from the Facebook (NSDQ: FB) data privacy scandal, which poses troublesome implications for Silicon Valley.

Reports emerged Thursday that the data of up to 87 million Facebook users may have been improperly shared with the Trump campaign’s political consulting firm Cambridge Analytica. That number is much higher than the originally estimated 50 million. Facebook also warned that “most users” have had their data harvested by third-party apps.

Facebook CEO Mark Zuckerberg is scheduled to appear before the U.S. Senate for two days, April 10-11. The young hoodie-wearing billionaire is likely to get flayed alive. The business model of not just Facebook but other tech giants, such as Alphabet’s Google, could be threatened by tougher regulation.

But the tech sector in general and Alphabet in particular also face several positives. The new U.S. tax bill makes it easier for tech firms to repatriate cash parked overseas. Tech firms will use this cash to fund internal innovation. Historically, a company’s research and development is positively correlated with its stock performance.

Alphabet started 2018 with many positives. For the fourth quarter of 2017, revenue of $32.3 billion was up 24% year-over-year. The firm posted robust operating results for full-year 2017, with total revenue of $110.9 billion, up 23% over 2016. Operating income reached $28.9 billion, up 22% year-over-year. 

The company says its cloud business is generating nearly $1 billion in revenue per quarter. Growth in search and YouTube continues apace.

Alphabet dominates the online search market; Google’s worldwide share now exceeds 80%. This commanding market position generates robust revenue and cash flow.

My long-term bullishness over Alphabet has not diminished. However, sit tight until these headwinds calm down. GOOG remains a hold.

A Clear-Eyed View of MicroVision

Laser scanning firm MicroVision (NSDQ: MVIS) has taken a beating year to date, but as I’ve pointed out above, so has the rest of the tech sector.

MVIS shares currently trade at $1.10; the average analyst one-year price target is $3.67. The consensus among analysts is that MVIS should rack up five-year earnings growth of at least 18%, on an annualized basis.

As with the other small-cap tech firms in our portfolio that I recently put on hold, I’ll be keeping a very close eye on the next round of earnings reports for MVIS. If operating results disappoint for MVIS and some of our more vulnerable holds, I’ll need to cut loose the under-performers.

But with MVIS, there’s ample reason for patience. I particularly like the fact that MVIS carries scant debt; the firm’s 12-month debt-to-equity ratio is zero. That’s unusual for a small-cap tech stock in a competitive field. MVIS’ market valuation is $86.4 million, which lends the stock to volatility but also greater room for growth than its large-cap peers.

The boom in 3D design and presentation is driving increasing demand for MVIS’ 3D laser scanning products. Global Market Insights reports that the worldwide 3D scanning market should reach $10 billion in annual sales by 2024, up from $3.41 billion in 2016 

The average analyst expectation is that MVIS’ five-year earnings growth should reach about 18%, on an annualized basis. But I think that’s conservative.

MicroVision has had a tough 2018 so far, but I’m not ready to give up on the stock just yet. Indeed, shares of MVIS spiked 5.80% on Thursday. That said, I’m taking a wait-and-see approach.

I’m downgrading MVIS to a “hold.”

John Persinos is chief investment strategist of Breakthrough Tech Profits.