Nvidia Corp (NASDAQ:NVDA) stock is trading lower Wednesday amid reports indicating that Nvidia and Intel Corp (NASDAQ:INTC) suppliers are reevaluating their manufacturing strategy in Mexico due to the threat of tariffs.
President-elect Donald Trump has pledged a 25% tariff on all imports from Mexico, a critical manufacturing hub for companies like Nvidia, Advanced Micro Devices Inc (NASDAQ:AMD), and Intel.
According to Nikkei Asia, both manufacturers are scrambling to address the potential impact of these tariffs.
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Some firms are increasing their production capacities within the U.S., while others have halted planned construction projects in Mexico.
Trump’s tariff plan, announced on Monday, includes a 25% levy on imports from Canada and an additional 10% tariff on goods from China, signaling a broad trade shift under the incoming administration.
Recently, Intel and the Biden-Harris Administration jointly announced that the U.S. Department of Commerce will allocate up to $7.86 billion to Intel under the CHIPS and Science Act. This funding will back semiconductor production and advanced packaging initiatives at Intel’s sites in Arizona, New Mexico, Ohio, and Oregon.
Microsoft Corp (NASDAQ:MSFT) CEO Satya Nadella emphasized the company’s dedication to Mexico during his 2024 Microsoft AI Tour address. Nadella revealed a three-year $1.3 billion investment plan focused on advancing AI infrastructure, enhancing digital marketing efforts, and expanding AI skill-building initiatives.
Nvidia has soared over 184% year-to-date, but its performance has plateaued in the past five months, creating a crossroads for investors, according to Direxion’s Ed Egilinsky. He notes the pause suggests the stock might be priced to perfection, leaving traders closely monitoring for its next move.
Egilinsky highlights that while Nvidia leads the AI sector, maintaining its edge may require higher R&D investments, which could impact its financial projections. Geopolitical risks, particularly U.S. tariffs and global trade policies, also pose challenges, potentially affecting Nvidia’s revenue from China and reliance on Taiwan for chip manufacturing.
Despite these uncertainties, Nvidia’s AI growth outlook remains strong. Key partners like Microsoft, Amazon.com Inc (NASDAQ:AMZN), and Meta Platforms Inc (NASDAQ:META) heavily depend on Nvidia’s chips for cloud, machine learning, and data centers, driving demand. Egilinsky believes this demand could push Nvidia to record highs, provided the company effectively manages geopolitical risks.
Price Action: Nividia stock is down 1.24% at $135.23 premarket at last check Wednesday.
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