NVIDIA shares were brutally bruised in the recent tariff-related turmoil. However, now as President Trump seems to have stepped away from the proverbial precipice, Lynx Equity expects NVIDIA to promptly return to its recent highs, accruing outsized benefits for its key supply chain partners - the provider of high-performance memory and storage solutions, Micron, and the retailer of servers and liquid-cooled AI racks, Super Micro Computer (SMCI).
For the benefit of those who might not be aware, President Trump has now instituted a 10 percent baseline tariff for all major trading partners of the US except China, which is currently subjected to a 125 percent tariff. This situation is expected to persist for the next 90 days, during which the US now expects to conclude agreements with its major trading partners.
Bear in mind that the tariffs on the import of vehicles and auto parts into the US persist at 25 percent, as do the import levies on aluminum and steel. For its part, China has imposed a tariff of 84 percent on all imports from the US.
.@AnnaEconomist's work suggests roughly similar levels of tariffs under the new announcement. Certainly not looking like a big relief here. pic.twitter.com/C4sRzDv014
— Bob Elliott (@BobEUnlimited) April 10, 2025
Despite the prevailing euphoria, we note that the average tariff rate that the US applies to its imports has not decreased materially despite Trump's off-ramp. This is primarily due to the punitive levies that imports from China still remain subjected to.
This brings us to the crux of the matter. Lynx Equity believes that NVIDIA, "with its AI servers sourcing most components outside the US and assembled by system integrators based in Taiwan, has built a multi-layered strategy to avoid nearly all US tariffs."
Moreover, the research house believes that China is unlikely to subject NVIDIA to punitive tariffs, "given China’s continued dependence on NVDA products."
The firm goes on to note:
"Due to tariff mitigation plans NVDA has in place, we are now calling for NVDA to return to recent highs, despite potential downside to data center capex expectations."
Specifically, Lynx Equity believes that NVIDIA can viably reach a stock price target of $140, which corresponds to a multiple of 31x to the consensus EPS expectations for the calendar year 2025.
Lynx Equity also believes that Micron and Super Micro Computer would accrue outsized benefits from NVIDIA's tariff mitigation strategy:
"As part of the NVDA supply chain, we reiterate our preference for MU at $125 PT and SMCI at $60 PT."
Finally, the research house also expects Dell to emerge as a relative winner in the prevailing situation.
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