Patrick Moorhead on Tariffs: Big Tech Stocks at Risk, AI Trade Outlook

Impact of Tariffs on Big Tech

• ⚠️ Tariffs on Chinese goods have not yet fully impacted the technology sector, with potential for significant cost increases.
• 💡 Increased costs from tariffs and capex amortization, coupled with decreased consumption due to higher prices, pose a threat.
• 🍎 Apple is identified as highly exposed due to its extensive manufacturing in China, where shifting production could take three to four years.
• 🏭 Moving manufacturing from China involves not just setting up factories but also relocating the entire supply chain for sub-assemblies.

AI Trade and Semiconductor Tariffs

• 🚀 The AI trade is considered a strong long-term bet, with continued buildouts of hyperscaler data centers and enterprises.
• 🤝 Most AI-related goods are covered by USMCA as they are manufactured in Mexico, shielding them from tariffs.
• 🚨 However, imposing tariffs on semiconductors would be catastrophic, leading to significant downturns across all of big tech.

Least Exposed Companies

• 💻 Microsoft is highlighted as having minimal exposure due to its limited reliance on products manufactured in China (estimated at 2%).
• ☁️ Its business services, like Microsoft 365 and Azure, are essential and unlikely to be turned off by customers, providing durability.
• ☁️ SaaS and software companies like Service Now, SAP, Oracle, IBM, Netflix, and Zoom are also not currently tariffed and are expected to be largely unaffected.
• 🇪🇺 While Europe is considering tariffs on US services, discussions with the EU make this a low likelihood scenario.