NETGEAR Shares Surge as U.S. Considers Ban on Rival TP-Link Routers

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NETGEAR Shares Surge as U.S. Considers Ban on Rival TP-Link Routers

Investing.com -- NETGEAR Inc. (NASDAQ:NTGR) shares rose by 17%, while F5 Networks, Inc. (NASDAQ:FFIV) recorded a 6.6% increase during today’s trading session. This surge followed reports from the Wall Street Journal that U.S. officials are investigating the Chinese company TP-Link due to national security concerns. The inquiry, which could lead to a ban on TP-Link routers in the U.S., may benefit competitors like NETGEAR and F5.

TP-Link, which holds a significant 65% share of the home and small business router market in the U.S., is under substantial investigation by the Departments of Commerce, Defense, and Justice. Concerns stem from allegations that the company’s routers are linked to cyberattacks and have visible security vulnerabilities. An analysis by Microsoft in October revealed that a Chinese hacker group utilized a network of compromised TP-Link routers to target Western organizations, government bodies, and Department of Defense suppliers.

A potential ban on TP-Link routers would represent the most significant removal of Chinese telecommunications equipment from the U.S. since the measures taken against Huawei Technologies by the Trump administration in 2019. The Biden administration views this move as part of a broader response to cyberattacks linked to China. Such a ban would disrupt TP-Link's market dominance, which has risen with the increased demand for reliable home internet during the pandemic.

The Department of Justice is also investigating TP-Link for possible antitrust violations due to the significantly lower prices at which it sells its routers compared to competitors, raising questions about monopolistic practices. A spokesperson for TP-Link stated that the company is assessing security risks and addressing vulnerabilities, expressing a willingness to demonstrate its security practices to the U.S. government.

Possible restrictions on TP-Link have indirectly highlighted the competitive offers from American firms like NETGEAR and F5. As investors anticipate a potential shift in market share, today’s stock movements reflect these companies' potential to capture a larger slice of the market if TP-Link's products are banned.

It is important to note that U.S. officials have not disclosed any evidence suggesting that TP-Link is intentionally serving as a channel for state-sponsored cyberattacks. However, ongoing investigations and increased scrutiny of supply chain security have clearly impacted investor sentiment, resulting in today’s gains for NETGEAR and F5 shares.

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