Which Mag-7 Stock, Apple or NVIDIA, Should You Buy for Tariff Relief?

With new tariffs being imposed by President Donald Trump on Chinese goods at the beginning of April, Apple Inc AAPL and NVIDIA Corporation NVDA saw their stocks decline. However, the latest tariff relief has been a blessing in disguise for these tech behemoths, helping them prevent higher import costs and product price rises. This has prompted speculation on which stock to invest in. Let’s explore –  Apple Stock Remains Risky Bet, Even With Tariff Exemptions President Trump’s steep tariffs on goods produced and imported from China could have disrupted Apple’s supply chains as severely as during the COVID-19 pandemic. However, Apple breathed a sigh of relief after the Trump administration exempted electronic devices like smartphones and computers from reciprocal tariffs.  Before the tariff exemption, Apple planned to increase iPhone production in India, which is subject to lower levies, while also securing its supply chain. Apple intends to produce over 30 million iPhones in India, satisfying a significant portion of American demand, which constitutes a third of global demand.  However, Apple is manufacturing its upcoming iPhone 17 in China, which will be launched soon. Shifting the production base to India or another location in a short time will require a herculean effort. It may also lead to retaliation from China, which has set up inquiries into U.S. companies and may create difficulties for Apple through its customs processes.  A complete breakup from China would be improbable as Apple produces the bulk of its iPhones in China, and there is a dearth of required skills to manufacture iPhones in the United States at the moment. Instead, Apple argued that the United States should boost semiconductor production and revive high-value job opportunities.  However, the tariff relief is temporary, and if no breakthrough occurs soon, it may impact Apple’s near-term profitability. President Trump said that relying on China for vital tech goods like smartphones and semiconductors isn’t acceptable. If tariffs are imposed, iPhone prices will rise, impacting American consumers and Apple’s sales volume. Anyhow, some tariffs still apply to goods imported from China and there may be sectoral tariffs on goods that have semiconductors, which can further affect Apple’s stagnating revenues. Given the supply-chain risks, stagnant revenues and tariff uncertainties, Apple isn’t a favorable stock choice currently. Moreover, according to the price/earnings (P/E) ratio, Apple stock trades at 27.4X forward earnings. In comparison, the Computer - Micro Computers industry’s forward earnings multiple is 26.05. The Apple stock, therefore, is overvalued and may plummet if tariff issues remain unresolved.Image Source: Zacks Investment ResearchHere’s Why NVIDIA Is the Better Stock to Buy Now Like Apple, NVIDIA too got a momentary relief from Trump’s tariffs. This is because certain critical chips used by NVIDIA and produced in China were exempted. Now, there is a 90-day pause in tariffs, but the outcome depends on how the negotiations between the United States and its trade partners unfold. So, an element of ambiguity persists.  However, NVIDIA remains the preferred stock to buy during these times of distress. With graphic processing units (GPUs) continuing to gain popularity at a breakneck speed and artificial intelligence (AI) infrastructure spending increasing, NVIDIA’s long-term future looks brighter. Lest we forget, Apple faces tough competition across all segments, economic challenges, and regulatory hazards, affecting its long-term outlook.  Coming back to NVIDIA, the company is experiencing high demand for new Blackwell and older Hopper chips because of their superior AI interfaces compared to competitors. The company’s CUDA software platform is in more demand among developers than Advanced Micro Devices, Inc.’s AMD ROCm software platform. Major cloud computing companies like Amazon.com, Inc. AMZN and Alphabet Inc. GOOGL  are also spending billions of dollars on AI data center infrastructure, which could benefit NVIDIA (read more: Which AI Stock, NVIDIA or Broadcom, Is the Better Bargain to Buy?). NVIDIA stock is currently more affordable than its competitors, with a forward P/E ratio of 25.18 compared to the Semiconductor - General industry’s 28.4X forward earnings multiple. This leads to NVIDIA having a Zacks Rank #2 (Buy) at present, whereas Apple has a Zacks Rank #4 (Sell). Image Source: Zacks Investment ResearchYou can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks