EU Tariffs, Ross Decker, and Nvidia Earnings: Navigating Crosscurrents in Tech and Trade

The tech sector is at a crossroads. As EU tariff policies on semiconductors loom, companies like Ross Stores (NASDAQ: ROST) and Deckers Outdoor (NASDAQ: DECK) face supply chain headwinds, while Nvidia's (NASDAQ: NVDA) stellar earnings underscore the resilience of AI hardware. This article dissects how these forces intersect—and why investors should pivot toward companies insulated from trade risks while capitalizing on AI's growth.

The EU Tariff Wildcard: Semiconductors and Supply Chain Vulnerabilities

The EU's delayed countermeasures to U.S. tariffs have created uncertainty for global supply chains. While explicit EU semiconductor tariffs are not yet finalized, the U.S. Section 232 investigations into chip imports and broader trade tensions suggest a volatile backdrop. Ross Stores and Deckers Outdoor—both reliant on Chinese imports—are already feeling the pinch. Ross withdrew its full-year outlook due to tariff-driven profit pressures, while Deckers cited macroeconomic uncertainties tied to trade policies.

Both stocks have underperformed peers this year, down 11% and 15% respectively, reflecting market anxiety over trade-related risks.

Nvidia's Q2 Earnings: A Beacon in the Storm

Nvidia's fiscal Q2 results were a masterclass in execution. Revenue hit $30.0 billion, up 15% sequentially and 122% year-over-year, driven by the AI boom. The Data Center segment alone surged to $26.3 billion, fueled by H200 and Blackwell chip sales. Even amid macroeconomic headwinds, Nvidia's guidance for $32.5 billion in Q3 suggests momentum is intact.

The stock's 45% rise in 2024 highlights investor confidence in its AI dominance. Yet, risks remain: supply chain bottlenecks and retaliatory tariffs could disrupt chip availability.

The Risk-Reward Crosscurrent: Where to Position Now

The interplay of EU tariffs, Ross/Decker's vulnerabilities, and Nvidia's outperformance creates a clear playbook for investors:

1. Avoid Direct Tariff Exposure

Companies with supply chains concentrated in regions facing tariffs (e.g., China for Ross) are at risk. Instead, prioritize firms with diversified production or contracts insulated from trade disputes.

2. Bet on AI Hardware Leaders

Nvidia's dominance in AI chips positions it to capitalize on enterprise demand. Its $50 billion share repurchase program and 75% gross margins reinforce its defensive profile.

3. Look for Distribution Plays with Resilience

Avoid retailers like Ross and Deckers, which lack pricing power to offset tariffs. Instead, target distributors with global scale and end-market diversification. For example:

• Taiwan Semiconductor Manufacturing (TSM): A $100 billion U.S. investment in chip production buffers it against trade volatility.
• ASML (ASML): The sole supplier of EUV lithography machines remains critical to advanced chipmaking, despite China-related constraints.

4. Hedge with Defensive Tech Stocks

Focus on firms with recurring revenue and low supply chain exposure:
- Microsoft (MSFT): Azure's AI cloud services are less directly impacted by chip tariffs.
- Broadcom (AVGO): Its enterprise software and semiconductor portfolio offer balanced growth.

The Bottom Line: Navigate, Don't Panic

The tech sector is bifurcating. Investors must avoid companies like Ross and Deckers, which are overly exposed to trade risks, while doubling down on AI leaders like Nvidia and infrastructure plays like TSMC. The EU's tariff policies remain a wildcard, but proactive diversification and a focus on AI's secular growth will reward patient investors.

Act now: Rotate into AI hardware and distribution leaders, and hedge with defensive tech stocks. The next wave of innovation—and profits—is already here.

The data is clear: the sector's growth trajectory remains intact—if you pick the right companies.