President Trump and President Xi will meet this week, focusing market attention on U.S.-China trade relations. The Nasdaq Composite rose 1.7 percent today to 26,247, while the S&P 500 gained 0.8 percent to 7,399. These gains reflect investor positioning ahead of potential policy shifts.
Apple stock increased 2.0 percent to $293.26 today, but we maintain a cautious outlook due to China exposure. The company generates substantial revenue from China and relies on Chinese manufacturing. The stock trades at 28 times forward earnings, a premium that does not fully account for potential trade friction. A 10 percent tariff hike could reduce Apple's earnings per share by 50 cents, pushing fair value closer to $275.
Tesla rose 4.0 percent to $428.35, though its Shanghai Gigafactory remains a key production hub for global sales. The company's reliance on China for production and sales presents significant risk if trade tensions escalate.
Nvidia, trading at $215.22, gained 1.8 percent today. Its business model relies on global access to advanced chip manufacturing and sales, particularly in the AI sector. Restrictions on technology exports to China or retaliatory measures could complicate Nvidia's supply chain and market reach. We see Nvidia as less exposed to consumer-level tariffs but highly vulnerable to technology export controls.
Microsoft dropped 1.4 percent to $415.06. The company holds substantial interests in the Chinese market, particularly in cloud services and enterprise software. Alphabet, up 0.7 percent to $400.71, faces similar regulatory and market access challenges. Progress on intellectual property protections or market liberalization for U.S. firms would benefit these companies.
The White House is expected to issue a readout of the discussions by Friday, providing the first concrete details on the meeting's outcomes. This official communication will clarify the immediate implications for U.S. technology firms.
