Apple, Nvidia Still Tech Names to Own Amid 'Tariff Armageddon'

The tech sector is reeling from the Trump administration's sweeping tariffs, which have sent shockwaves through global supply chains and sent stocks tumbling. However, amidst the chaos, some tech giants like apple and nvidia are emerging as potential safe havens for investors. Here’s a deep dive into how these companies are navigating the tariff storm and why they might still be worth owning.

The Impact of Tariffs on Tech

The tariffs imposed by the Trump administration have had a profound impact on the tech sector. With a heavy concentration of supply chains in Asia, particularly in China, Taiwan, and South Korea, many tech companies are feeling the pinch. The tariffs have led to increased production costs, supply chain disruptions, and uncertainty about future operations.

Eric Compton, the director of equity research for technology at morningstar Research Services, notes that "technology, particularly hardware stocks, have sold off more because a lot of their supply chains are based in a lot of the places you just mentioned, especially in Southeast Asia and in China." This has led to a significant sell-off in hardware stocks, with semiconductor stocks also taking a hit, though not as severely as hardware.

Apple: A Mixed Bag

Apple, one of the "Magnificent Seven" tech stocks, is particularly vulnerable to the tariffs. The company's supply chain is heavily reliant on Asia, with a significant portion of its iPhone production taking place in China. The tariffs could lead to a material increase in the cost of an iPhone, impacting Apple's margins and potentially reducing the number of phones sold.



However, Apple has several strategies it could employ to mitigate these impacts. One option is to move some of its supply chain operations to other countries that are not subject to the tariffs. Another strategy could be to negotiate with suppliers to find cost-saving measures or to pass on some of the increased costs to consumers through higher prices. Additionally, Apple could focus on increasing the efficiency of its supply chain to reduce costs.

Nvidia: A Silver Lining

Nvidia, on the other hand, has been given a reprieve from certain tariffs, which could significantly enhance its competitive advantage in the semiconductor market. The exemption from tariffs on semiconductors means that Nvidia will not have to pay the 32% tariffs imposed on Taiwan, where a significant portion of its advanced chips are manufactured. This is crucial because about 44 percent of logic chips imported to the US come from Taiwan.

The exemption allows Nvidia to maintain lower production costs compared to competitors who may face higher tariffs on their semiconductor imports. This is particularly important given that Nvidia's products, such as its AI graphics processing units, rely heavily on advanced chips made by Taiwan Semiconductor Manufacturing Company (TSMC). The ability to source these chips without additional costs can enhance Nvidia's product quality and innovation, further solidifying its market position.

Market Sentiment and Investor Strategy

The broader market sentiment is cautious, with the S&P 500 now down about 19% from its mid-February peak, pushing the stocks to the edge of a bear market. Investors are bracing for more turmoil amid President Trump's growing trade war, which threatens to raise prices for U.S. consumers and blunt economic growth.

However, some analysts remain optimistic about the long-term prospects of tech stocks like Apple and Nvidia. Wedbush analyst Dan Ives notes that "these tariffs have already created significant enterprise demand destruction out of the gates as [capital expenditures] and new projects are being halted across the U.S. until this chaotic situation is better understood by CEOs and business leaders around the world."

Conclusion

While the tariffs pose significant challenges for the tech sector, companies like Apple and Nvidia are finding ways to navigate the storm. Apple's strategies to mitigate supply chain disruptions and Nvidia's exemption from certain tariffs make them potential safe havens for investors in these uncertain times. As the market continues to grapple with the fallout from the tariffs, these tech giants could emerge stronger, making them names to own amid the 'tariff armageddon.'