Magnificent Seven rallies as Trump signals easing of China tariffs

The “Magnificent Seven” tech giants—Apple, Nvidia, Tesla, Microsoft, Meta Platforms, Amazon, and Alphabet—experienced substantial gains following President Donald Trump’s announcement of a forthcoming tariff reduction on Chinese imports.

This policy shift has invigorated investor sentiment, leading to notable increases across major U.S. stock indices.​

Trump’s tariff reduction fuels rally in tech stocks

The tech giants stocks rallied for a second consecutive day, led by strong gains in Tesla and Amazon, as signals from the Trump administration suggested a potential easing of tensions in the U.S.-China trade war.

Tesla (TSLA) surged as much as 7% early Wednesday before trimming some of its gains. Amazon (AMZN) and Meta (META) climbed sharply, rising approximately 7% and 6%, respectively.

Nvidia (NVDA) advanced by more than 5%, while Apple (AAPL) gained by 3.5%. Google parent Alphabet (GOOG) and Microsoft (MSFT) each added around 3%.

The rally followed President Trump’s calmer rhetoric toward China and hinted at a potential reprieve from unprecedented 145% “reciprocal” import tariffs.

Speaking during a White House news conference Tuesday, Donald Trump said the current rate is “too high” and “will come down substantially”. Trump said he plans to be “very nice” to China in order to reach a deal in trade talks. Treasury Secretary Scott Bessent separately called the U.S.-China trade war unsustainable during a private event in DC Tuesday.

China’s crucial role in tech supply chains amplifies the impact of policy shift

A shift away from Trump’s aggressive, unprecedented trade policies could benefit tech companies, given China’s crucial role in their supply chains.

According to Wedbush’s Dan Ives, about 90% of Apple’s iPhones are manufactured in China, representing 17% of the company’s revenue in 2024.

In an earlier note to investors this month, Ives pointed out that Tesla relies on China for a significant portion of its parts and batteries. He also warned that the escalating trade war with China would hinder Tesla’s ability to compete with local rival BYD in one of its key markets. Tesla’s first-quarter earnings report on Tuesday fell short of Wall Street’s expectations.

At the same time, a third of the total value of goods sold on Amazon comes from China. According to Raymond James, Chinese advertisers accounted for 14% of total spending on Amazon advertising in 2024, which recently downgraded the stock. These advertisers account for 11% and 6% of total ad spending on Meta and Google, respectively.

DA Davidson analyst Gil Luria estimates that China and Chinese companies make up between 20% and 40% of Nvidia’s end customers. However, he acknowledged that it’s difficult to determine the exact figure due to the company’s revenue reporting practices.

Earlier this month, Trump shook global markets by announcing steep “reciprocal” tariffs on key U.S. trading partners. He imposed a 10% tariff on all global imports on April 5. While his reciprocal tariffs, originally set to take effect on April 9, were delayed for 90 days, a 145% duty on Chinese imports remained in place.

The announcement of the steep “reciprocal” tariffs on key U.S. trading partners sent Big Tech stocks into a downward spiral, with the “Magnificent Seven” companies, including Amazon, losing $2 trillion in combined market value in the wake of the reciprocal tariff news before the three-month pause was put into effect.

A brief reprieve from tariffs for electronics helped Big Tech stocks last week, but Trump administration officials signaled the exemption was temporary and set the stage for tariffs on semiconductors. The president has promised that most electronics will still get wrapped up in his tariffs, which could hurt Nvidia and other Big Tech firms.

Additionally, the U.S. government introduced export bans on chips from Nvidia and its competitor Advanced Micro Devices last week, causing their stock prices to tumble further.

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