Will the "Trump Put" Save Nvidia?

Nvidia (NVDA) has been a market darling, but recent headwinds, including the emergence of Chinese AI chatbot DeepSeek and Trump's tariff proposals, have raised concerns about the company's future. The "Trump put" theory suggests that Trump's presidency could limit market downside, but Nvidia's dependence on international manufacturing and sales makes it vulnerable to Trump's proposed tariffs and export restrictions. This article explores whether the "Trump put" can save Nvidia and examines the potential impacts of Trump's policies on the company's earnings and stock price.



Nvidia's stock performance has historically reacted positively to changes in U.S. presidential administrations. During Trump's first term, Nvidia's stock jumped more than 5x, driven by strong demand for its chips, AI and data center growth, tax cuts, and deregulation. However, Nvidia's dependence on international manufacturing and sales, particularly in China, makes it vulnerable to Trump's proposed tariffs and export restrictions.



Trump's proposed tariffs on imported products could hurt Nvidia, as much of its manufacturing is done outside the U.S., including some in China. Higher costs resulting from tariffs could be passed on to customers, potentially impacting their spending on Nvidia's chips. Tariffs could also cause inflation to spike, leading the Federal Reserve to raise interest rates and negatively impacting some customers' spending on Nvidia's chips. In the long term, these factors could negatively impact Nvidia's earnings and stock price.

On the other hand, Trump's proposed corporate tax cuts could boost Nvidia's earnings. 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 well below the proposed 15% corporate tax rate. A lower tax rate could lead to higher net income, potentially driving share price appreciation in the long term.



Trump's proposed AI Executive Order repeal could also positively impact Nvidia. This repeal could cause tech companies to invest more heavily in developing artificial general intelligence (AGI), driving demand for Nvidia's chips and positively impacting the company's earnings and stock price.

However, Nvidia's dependence on international manufacturing and sales, particularly in China, makes it vulnerable to Trump's proposed tariffs and export restrictions. These policies could significantly impact Nvidia's production costs, sales, revenue, and supply chain, potentially leading to a decrease in demand for its products and a loss of market share.

In conclusion, the "Trump put" theory suggests that Trump's presidency could limit market downside for Nvidia. However, the company's dependence on international manufacturing and sales, particularly in China, makes it vulnerable to Trump's proposed tariffs and export restrictions. While Trump's proposed corporate tax cuts and AI Executive Order repeal could positively impact Nvidia's earnings and stock price, the potential negative impacts of tariffs and export restrictions could outweigh these benefits. Investors should closely monitor the situation and consider the potential long-term impacts of Trump's policies on Nvidia's earnings and stock price.