Investing.com — Shares of NETGEAR Inc. (NASDAQ:NTGR) surged 17% while F5 Networks, Inc. (NASDAQ:FFIV) saw a 6.6% rise in today’s trading session, following reports from the Wall Street Journal that U.S. authorities are investigating Chinese company TP-Link over national security concerns. The scrutiny, which could potentially lead to a ban on TP-Link routers in the U.S., would be a boon for competitors like NETGEAR and F5.
TP-Link, which holds a significant 65% share of the U.S. market for home and small business routers, has come under intense investigation by the Commerce, Defense, and Justice departments. The concerns stem from the company’s routers being linked to cyberattacks and having apparent security flaws. A Microsoft (NASDAQ:MSFT) analysis in October indicated that a Chinese hacking entity used a network of compromised TP-Link routers for cyberattacks targeting Western entities, including government organizations and Defense Department suppliers.
The potential ban on TP-Link routers would be the most significant removal of Chinese telecom equipment from the U.S. since the Trump administration’s actions against Huawei Technologies in 2019. The Biden administration is also considering this move as part of a broader response to cyberattacks linked to China. Such a ban would disrupt TP-Link’s market dominance, which escalated during the pandemic as demand for reliable internet at home increased.
The Justice Department is also investigating TP-Link for possible antitrust violations due to their routers being sold at prices significantly lower than competitors, raising questions about attempts at monopolization. TP-Link’s spokeswoman has stated that the company assesses security risks and addresses vulnerabilities, expressing willingness to demonstrate their security practices to the U.S. government.
The potential restrictions on TP-Link have inadvertently highlighted the competitive offerings from American firms like NETGEAR and F5. As investors anticipate a possible shift in market shares, today’s stock movements reflect the potential for these companies to capture a larger portion of the market if TP-Link’s products are banned.
It’s important to note that U.S. officials have not disclosed any evidence that TP-Link is intentionally a conduit for Chinese state-sponsored cyberattacks. However, the ongoing investigations and the heightened scrutiny on supply chain security have evidently influenced investor sentiment, leading to today’s uptick in NETGEAR and F5 shares.
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