Tech hardware stocks tumbled Monday after President Trump instituted tariffs on goods imported from Canada, Mexico and China. Nvidia stock fell along with Apple, Dell Technologies and others.
However, tech stocks that took big hits early closed above their lows.
The biggest impact on the semiconductor and electronics industry could come from tariffs on imported automobiles, which contain numerous electronic components, from Canada and Mexico. Trump set 25% tariffs on Canada and Mexico. He gave Mexico a one-month reprieve after Mexican President Claudia Sheinbaum committed to send 10,000 troops to the border to halt drug trafficking.
Automotive-chip makers NXP Semiconductors, STMicroelectronics and Texas Instruments retreated Monday. NXP slid 1.8%, STMicro dropped 3.6% and TI fell 2%.
Other stocks trading lower on the Trump tariffs included Apple, down 3.4% on Monday, and Dell, also down 3.4%. Taiwan Semiconductor Manufacturing stock sank 4.6%.
On the stock market today, Nvidia stock dropped 2.8% to close at 116.66. Shares of the AI chip leader plunged as much as 5.9% to 113.01 at the opening bell. That was its lowest level since mid-September.
Wall Street analysts on Monday were attempting to gauge the impact of the Trump tariffs.
Trump's 10% tariff on China could be an opening salvo, Wedbush Securities analyst Daniel Ives said in a client note.
"Given the threats of much higher tariffs (60%) for China on the campaign trail, this is less onerous policy coming out of the gates for the Trump Administration, but the Street clearly is worrying about what is next for China tariffs and the impact on chips/AI driven names," Ives said.
The Trump tariffs could be a negotiating tactic, Ives said.
"This is all part of a bigger game of high stakes poker between the U.S. and China when it comes to trade negotiations," he said.
Trump Tariffs Could Hit Apple Profits
Given that Apple still manufactures most of its iPhones in China, the company likely will see a profit hit from the tariffs, BofA Securities analyst Wamsi Mohan said in a client note. But Mohan said the impact is "manageable."
Longer term, Apple might have to further diversify its manufacturing base from China, Mohan said.
In a client note, Bernstein analyst Stacy Rasgon said the U.S. imports few semiconductors from Canada, Mexico and China. But chips are used in finished electronics such as smartphones from China, computer gear from China and Mexico, and automobiles from Canada and Mexico.
"These end device categories do make up large amounts of imports from Canada, Mexico and China," Rasgon said. "Hence the prospect for indirect effects seems high (though of course not just for semiconductors)."
In a report Monday, analysts at investment bank UBS said they don't think the 25% tariffs on Canada and Mexico will be sustained for a prolonged period.
"The Trump administration would not want to jeopardize U.S. economic growth or risk higher inflation by leaving the tariffs in place for a sustained period, and significant stock market volatility could lead to a change in approach," UBS said.
The analysts added, "The significant potential economic effect of the tariffs on Mexico and Canada may ultimately lead to concessions, even if their initial response has been to announce retaliation."
Meanwhile, UBS believes that the U.S. effective tariff rate on China will eventually rise to 30% from the current 11%.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
