3 Tech Stocks at Risk from Potential Trump Tariffs

The votes have been counted, and it’s official: President-elect Donald Trump has achieved a historic milestone by winning nonconsecutive presidential terms. As he prepares to be sworn in as the 47th President of the United States, Wall Street’s focus has shifted toward his campaign policies and the potential implications for financial markets. While investors are generally optimistic about what is expected to be a pro-business agenda, concerns around tariffs are emerging as a notable point of worry. Trump is advocating for universal tariffs of 10%-20% across goods from all countries, with a particularly steep proposal for a 60% tariff on goods imported from China. This latter point is especially concerning for some American companies, particularly technology giants with substantial exposure to the Chinese market.

According to brokerage firm Bernstein, here are three prominent tech stocks that could be significantly affected by potential Trump tariffs.

1. Apple

Cupertino-based tech powerhouse Apple (AAPL) has transcended beyond being merely a tech company. Co-founded by the visionary Steve Jobs and now led by Tim Cook, Apple stands as a cultural icon synonymous with innovative devices like the iPhone, MacBook, and Apple Watch. With a staggering market capitalization of $3.43 trillion, Apple’s stock has seen a year-to-date increase of 17.8% and offers a dividend yield of 0.44%.

However, Apple’s vulnerabilities are becoming apparent, particularly in light of its challenges in China. With approximately one-fifth of its revenues derived from this market, Bernstein analyst Toni Sacconaghi warns of potential adverse impacts if Trump’s tariffs are enacted. “For example, if Apple did not raise prices and volumes were unchanged, proposed Trump tariffs could negatively impact company gross profits by an estimated 13% and EPS by $1.44 (or 19%),” Sacconaghi stated.

Apple’s performance in China has already highlighted its struggles. The company reported a year-over-year decline of Greater China sales to $15.03 billion for the latest quarter, alongside a 7.7% drop in annual revenue for the region. Market share figures further underline these challenges, with Apple’s standing decreasing from between 15-17% over the past few years to only 15.6% during the first three quarters of 2024, against increasing pressure from local brands.

One primary factor driving this decline is the heightened price sensitivity of Chinese consumers. Apple’s premium products, such as the iPhone 16 Pro and Pro Max, come at a steep price compared to lower-cost competitors like Huawei’s Mate 60 Pro, which offers a wide array of advanced features. Pricing premiums between 15%-40% over rival devices may dissuade price-conscious consumers.

Moreover, Huawei is experiencing a comeback in demand, particularly with its Pura 70 series, which has been well-received due to its superior camera and AI capabilities. This resurgence follows Huawei’s previous setbacks due to U.S. sanctions. Meanwhile, brands like Vivo and Xiaomi continue to capture market segments focused on affordability, further complicating Apple’s efforts in the competitive Chinese landscape.

Despite these challenges, Apple remains in solid financial health. For the latest quarter, Apple reported net sales of $94.9 billion, marking an increase of 6.1% compared to the previous year, although it saw a significant drop of 33.6% in earnings per share. Key revenue segments, including iPhone sales ($46.2 billion, +5.5% YoY), Mac sales ($7.7 billion, +1.3% YoY), and Services ($24.9 billion, +12% YoY), indicated growth. Additionally, the company boasts a robust cash reserve of approximately $30 billion against short-term debts of $10.9 billion.

Analysts currently provide a “Moderate Buy” rating for AAPL stock, with an average target price of $241.05, signaling an upside potential of about 6.2% from current levels. Out of 33 analysts, 18 have rated the stock as a “Strong Buy,” while others hold varying opinions offering a mixture of “Moderate Buy,” “Hold,” and “Strong Sell” ratings.

The potential for tariffs under President Trump could pose formidable risks for not only Apple but also other tech giants within the market. Investors will need to keep a close eye on policy developments as they could play a pivotal role in shaping the future landscape of the technology sector.