Temu and Shein's soaring popularity has Wall Street eyeing China's influence on tech earnings

Temu and Shein have exploded in the U.S. by going on an online marketing blitz and offering consumers inexpensive goods from China, whether it's a $3 pair of shoes or a $15 smartwatch.

The rise of the discount shopping apps, along with TikTok Shop from China's ByteDance, have generated fresh competition for U.S. e-commerce companies Amazon, eBay and Etsy.

Much of their growth, according to some industry experts, is the result of a trade loophole, known as the de minimis exception, which allows for packages shipped from China valued at under $800 to enter the U.S. duty free. Amazon's top public policy executive, David Zapolsky, calls it a "concerning trend" that should be further examined by global regulators.

"I think there's a question about the extent to which some of their business models are subsidized," Zapolsky told CNBC in a recent interview, speaking broadly about Chinese companies. "At a very tactical level, there are rules around what you can show as your list price vs. the sale price, and I think those rules are not always enforced."

The topic of Temu and Shein's growth will hover over tech earnings this week, as Amazon reports second-quarter results alongside Meta, eBay and Etsy. Investors will be watching for any commentary about the impact of Temu and Shein on e-commerce marketplaces and for discussion of their ad spending, which has helped fuel Meta's recent expansion.

Tech earnings season got off to an ominous start last week. Late Tuesday, Alphabet reported a slight beat on revenue, but missed estimates on YouTube ad sales, pushing the stock down 5% on Wednesday. Tesla shares plunged 12% that day, the biggest drop since 2020, on weaker-than-expected earnings and a second straight quarter of declining auto