NVIDIA's Tariff Impact Minimal, Morgan Stanley Maintains Buy Rating
1min read Morgan Stanley has released a research report indicating that while market concerns over tariffs have eased, the impact remains a topic of ongoing attention. However, for nvidia (NVDA.US), the direct impact of tariffs is relatively limited. Given the strong demand for artificial intelligence (AI) and NVIDIA's supply chain flexibility, the company is poised to deliver outstanding performance. morgan stanley has listed NVIDIA as its top pick in the semiconductor industry and maintained a "buy" rating with a target price of $162.
Led by analyst Joseph Moore, Morgan Stanley notes that the current 10% tariff on hardware could increase to 32% within the next 90 days, but the direct impact on NVIDIA is minimal. For instance, the current tariff affects revenue from data center customers by approximately 2%. If the tariff rate increases to 32%, the impact could rise to 6-6.5%. However, NVIDIA has mitigated potential risks by shifting some production to North America, such as Mexico, to avoid tariffs. High-end products like the GB200, which are primarily assembled in North America, are less likely to be affected by tariffs.
From a demand perspective, Morgan Stanley highlights that NVIDIA's performance is particularly robust, with its Blackwell series products already sold out. Customers are less sensitive to price fluctuations. The analyst points out that the current surge in demand for AI inference capabilities has led some customers to redeploy GPUs from training to inference tasks.
Regarding future tariffs on semiconductors, Morgan Stanley believes the situation is unclear. While semiconductors have been exempted in certain periods, many industry participants expect they may still face tariffs. If semiconductors are taxed, TSMC's wafers and HBM memory would be assessed for tariffs, impacting NVIDIA's data center business, which has a 75% gross margin, by approximately 5%. This impact is relatively manageable for NVIDIA but could be more significant for companies with lower gross margins. Additionally, China may impose tariffs on U.S. semiconductors, but the details are unclear, and the situation is complex as U.S. semiconductors are not entirely manufactured domestically.
Despite the optimistic outlook for NVIDIA, Morgan Stanley cautions investors to be mindful of macroeconomic risks. Analysts warn that a global economic recession could strain investment funds, potentially impacting NVIDIA's business. Industry experts are more concerned about export controls, particularly restrictions on multinational customers, than tariffs.
Overall, Morgan Stanley believes that the performance of the semiconductor sector will closely follow NVIDIA's lead. Currently, NVIDIA's price-to-earnings ratio is around 20 times the consensus estimate for 2025. If NVIDIA's stock performance falters, its competitors and suppliers may also face pressure.
