Nvidia Retakes Key Level On Eve Of Trump Inauguration; Is Nvidia A Buy Now?

Nvidia (NASDAQ: NVDA) has retaken the $1 trillion market capitalization level on the eve of Donald Trump's inauguration, raising questions about whether the semiconductor giant is a buy now. The stock has been on a tear, gaining over 400% since Trump's first inauguration in 2017 and a further 125.5% in 2021, the first year of Biden's term. But what does this mean for investors, and how might a Trump presidency impact Nvidia's future?



Nvidia's performance has been affected by political events in the past, and a Trump presidency could have both positive and negative impacts on the company's future. Here's a breakdown of how Nvidia's stock has performed during previous administrations and the potential implications of a Trump presidency:

1. Nvidia's performance during Trump's first term (2017-2021):
- Nvidia was one of the best-performing S&P 500 stocks in 2017, ranking ninth with a +81% return.
- From Trump's inauguration on Jan. 20, 2017, to Biden's inauguration on Jan. 20, 2021, Nvidia shares gained more than 400%.
- Nvidia also ranked ninth in 2021, the first year of Biden's term, with a 125.5% gain.

2. Potential impacts of a Trump presidency on Nvidia:
- Positive impacts:
- Trump's proposed corporate tax cuts could boost Nvidia's earnings, although the company's effective tax rate is already low.
- Trump's stance on reducing regulations could benefit Nvidia, as the company has not been significantly impacted by regulations in the past.
- A repeal of Biden's Executive Order related to AI could encourage tech companies to invest more in developing artificial general intelligence (AGI), potentially benefiting Nvidia.
- Negative impacts:
- Trump's proposed tariffs on imported products could increase costs for Nvidia, as much of its manufacturing is done outside the U.S., including some in China.
- Higher tariffs could cause inflation to spike, potentially leading to higher interest rates and reduced customer spending on Nvidia's chips.
- Trump's general stance toward China may not be beneficial for Nvidia, as the company has significant business ties with the country.



The primary drivers of Nvidia's earnings are growth in AI chip acquisitions, demand for high-performance chips, and geopolitical factors. Trump's policies could impact Nvidia's earnings in several ways:

1. Tariffs: Trump's proposed tariffs on imported products could hurt Nvidia, as much of its manufacturing is currently done outside the U.S., including some in China. Nvidia would likely try to pass higher costs resulting from the tariffs on to its customers, which could negatively impact its earnings.
2. Corporate tax cuts: Trump's proposal to extend or further reduce corporate tax cuts could boost Nvidia's earnings, but perhaps not as much as one might think. In the first half of 2024, Nvidia paid income taxes of $5.01 billion, only 13.7% of revenue. In 2023, the company's tax bill was $4.06 billion, 12% of revenue, both levels already well below the 15% corporate tax rate proposed by Trump.
3. Regulations: The Biden Administration's regulations limiting exports of AI chips to China have put a damper on Nvidia's business to some extent. If Trump repeals these regulations, it could help Nvidia's earnings. Additionally, Trump's pledge to reduce government regulations on businesses could have an indirect positive impact on Nvidia's earnings.

In conclusion, while Nvidia's stock has performed well during Trump's first term, a second Trump presidency could have both positive and negative impacts on the company's future. Investors should consider these potential effects when making investment decisions. Nvidia's retaking of the $1 trillion market capitalization level is a significant milestone, but it remains to be seen whether the stock will continue to soar under a Trump presidency.