Shares of leading microchip and semiconductor companies are surging on news that the U.S. has agreed to temporarily lower the import tariffs imposed on China to 30% for the next 90 days.
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The stocks of Nvidia (NVDA), Advanced Micro Devices (AMD), Broadcom (AVGO), and others, are up about 5% on May 12 amid reports that China has agreed to lower its import duties on American goods to 10%. The new tariffs will remain in effect for 90 days while the two countries continue negotiations aimed at resolving their trade differences, say U.S. and Chinese government officials.
The tariffs the U.S. had imposed on Chinese imports come down from 145%, a level that had effectively ground trade between the world’s two largest economies to a halt. China had retaliated against the U.S. with tariffs of as high as 125% on American imports, while also targeting American made films and some services.
Tech Rebound
News of the reduced tariffs and ongoing negotiations have sent U.S. stocks surging. The blue-chip Dow Jones Industrial Average is up 1,000 points, while the benchmark S&P 500 index has gained nearly 3%. The technology-laden Nasdaq Composite Index is up 600 points or nearly 4% as the share prices of microchip and semiconductor companies power the rebound.
While investors are cheering the outlook for U.S. chipmakers, import duties of 30% on Chinese goods are still extremely high and likely to impact the U.S. economy given the amount and breadth of products America buys from China. Economists continue to characterize tariffs as a tax on consumers and see the current tariff regime as slowing growth in the U.S. economy.
At the same time, the U.S. government continues to impose restrictions on the export of American-made microchips and processors to China. On the flipside, the Chinese government has reportedly lifted restrictions on the export of rare earth metals and magnets that are critical components used in the making of chips and semiconductors in America.
Is NVDA Stock a Buy?
The stock of Nvidia has a consensus Strong Buy rating among 40 Wall Street analysts. That rating is based on 34 Buy, five Hold, and one Sell recommendations assigned in the last three months. The average NVDA price target of $164.35 implies 36.30% upside from current levels.
