Tariffs Impact on Tech Stocks: A Black Swan Event? — With Adam Parker of Trivariate Research

Channel: Alex Kantrowitz

Published at: 2025-04-08

YouTube video id: stoUeNHCKSs

Source: https://www.youtube.com/watch?v=stoUeNHCKSs

what's going to happen to big tech after
this. So, uh, just let's talk a little
bit about what Dan Ives had to say. He
said this could become a black swan
event. Uh, you're playing with the third
rail. He cut his Tesla target uh to 315
from 550 and he says that Nvidia numbers
could come down 10 to 15%. What do you
think about that, Adam? I mean, do you
think that this is a black swan event
for tech?
Um, first of all, I'm jealous of Dan I's
fashion game. Um, as I wear the white
the white shirt and the blue blazer and
the red and blue tie, I know he would be
doing something a little more
interesting. Um, look, I don't know what
Tesla is worth. I have no idea. I think
it's impregnable to analysis. So, I
don't know if it's worth 300, 500, a,000
or zero. Uh, it's been trading so
disconnected from uh what I understand
the core business is for so long. Um,
that I I I more power to people who can
price that. My view for a really long
time had been for all the mag seven. We
published this dozens of times is you
should be market weight the group and
the reason you should be is they're not
particularly syncratic. They're really
well covered. You don't know anything
about them that nobody else knows that's
not in the price yet you can't replicate
them. I can't find 30 stocks that trade
just like Tesla 3.3% position each and I
mirror its performance with less risk.
Like you can't do that. So just why let
it hurt you or help you? And that had
generally been my view of that cohort re
for years. Um and and until early
February when the beta got high, the
capex got high and all that stuff. So
when we went underweight, so so broadly
that's been my generic view of the Mag
7. I think for Tesla, I really have no
idea what it's worth. And I would I
don't know how anyone can have
confidence um in in saying its value.
When I worked on the buy side, we were
short the thing a ton on its way up. So
maybe there's a little bit of bitter
bitter scar tissue from trying to value
it and being wrong in the past. You
know, I worked at when I worked at a big
fund. So I I don't see
um the the Tesla I don't have a
differential view on Tesla. I think it's
hard to value it. The second one was
about Apple, right? Is that what he
said? No, he was talking about Nvidia.
Nvidia. Oh, sorry. Nvidia I do have a
view a little bit now. I I think you
know I used to be a semiconductor
analyst for a long time and um so kind
of guilty as charge is always liking the
semis a little bit more than everything
else but I kind of feel like if the
capex is going to stay high from the
hyperscalers you're basically saying
Nvidia's revenue is good and if I kind
of mark to market where I am this year
you know Nvidia is down a ton and I
don't think they're going to miss their
their earnings in the short term. So I
sort of think Nvidia is better
positioned than the other Mag 7 in the
short term. Um and I'm a believer big
time in the longer term you know kind of
AI playbook including and in particular
health care where if you go to Nvidia's
website and scroll to the healthcare
section you'll get really enthusiastic
about Nvidia's role. I think Jensen
knows more about healthcare than most
healthcare companies. Jensen the CEO of
Nvidia. So I I would say I like it
particularly after this huge reset, but
um you know you can't have capex be
reduced a ton from the hyperscalers and
not get a big miss from Nvidia. So
there's that in congruity, but I think
in the near term um it's scored better
than the other a lot of the other Mac 7.
But that leads right into like what's
going to happen with cloud and data
centers. I mean there's a double-edged
sword here, right? for cloud first is
it's not just so semiconductors I think
are exempt from the tariffs although
there was a 25% tariff on semiconductors
coming in but they're exempt but it's
not just the chip right everything you
need to build a data center is going to
be more expensive number one so your
capex is going to go up even higher to
build this stuff and the second is who's
the users uh who are going to be the
users of these cloud services is it
going to be Nike right because they need
they have you know needs to um buy
software and cloud hosting, they have a
very large digital uh presence. Um if
Nike's margins go down and Nike's
business is hit by tariffs, then all of
a sudden, are they going to do that
optional AI program from Azure? Are they
going to do that, you know, new buildout
uh and and move to cloud? Like all that
starts to slow. It's not maybe it's non-
essential capbacks now, but the way I'm
thinking about that, Alex, is like look
semis grew about 2% above GDP for 30
years. I think they're going to grow
something like 5 to 7 to 8% above GDP.
You know, if you look at the last two
years, say through the next eight, so
that there'll be a 10-year window.
They're going to grow way more. And so
they're going to gain share of the
global spending pie because they do
things that aren't easy to replicate in
a big chunk of it. Um, and you know, not
all semis are the same as you well know.
There's industrial and auto semis and
other things that are, you know, maybe
the average selling prices are low, but
I don't think every company has to do
their own buildout to participate. Look
at Trivari. We have an Nvidia chip. It's
out on EQIX. We use it to search every
transcript for certain words and tag
stocks and do all the analysis we do. I
I have the um Mercedes C-Class or
whatever the Metress. I don't have the I
don't have the black wall, but like it
was still 10 grand for the chip and it's
massively efficient. So, I think
companies will find in a lot of cases
that access to Nvidia products could
really help them predict their employee
behavior better, predict their customer
behavior better, and and maybe not have
to do any net hiring. And so, as your
revenue grows 3, four, 5% a year over a
5 to 10 year period, if you can do that
without any net hiring for a lot of
companies, there's that's margin
expansion. we've seen like if I've
learned one thing analyzing equities in
the last 25 to 30 years, it's you do not
short stocks where the margins are going
up. So, do you think that they're going
to try to just replace people with AI
more than ever now? Yeah, for sure. Um,
absolutely. Um, I think if you get
better at predicting your employee
behavior and your customer behavior,
there's a lot of businesses that have
lots of employees, low margins, and lots
of revenue dollars, right? Think about
the whole health care sector, right?
McKesen C was been a great stock,
Cardinals and Cor, a bunch of healthcare
stuff that you know, but the whole
health care services sector, hospital,
like these these companies are super
inefficient where they can and use
technology and get much better, right?
Like have you been to a doctor lately?
You look young and healthy, so you
probably haven't, but like whether they
do they hand you a clipboard and a pen
and you like circle stuff. Just think
about how stupid that is like in terms
of just like the ability to improve on
on their efficiency. So like I I think
you will see uh cyber of course nobody
cuts that but then after that I think
you're going to constantly think like
how can I replace employees with
technology? How can I um position myself
to benefit from better analytics etc
etc. So, I I'm bullish on the long-term
kind of compute trade and I'm bullish on
semis and Nvidia has still got the best
product with the best company in this
kind of positioning and in this area and
it's stock's been reset a lot from the
recent high, right? But I'm just going
to ask it one more time. I mean, let's
say you are a customer of these cloud
companies. Um, you have a big plan. You
have a big AI implementation. By the
way, we know 15% of AI uh proof of
concepts make it out uh into production.
15% on a good day, right? Y you have a
lot of experimental spend that's going
with the cloud companies to try to
figure out this AI thing. All of a
sudden, every input that you have in
your business goes up, maybe 25, maybe
40%. You are scrambling just to make the
numbers work. Doesn't that AI which AI
spend which is discretionary if it's not
100% going to um production doesn't that
get cut for sure look the one thing that
you know for sure is semis are a
cyclical business okay and so what
you're there's a combination that causes
the cyclicality one is you spend capex
you put the depreciation burden on your
on your cost of goods sold and then
revenue slows and your margins get
creamed right and we've seen that for 40
years what you're saying is in a in a
recession or you know kind of a growth
um pullback will the revenue side be
disappointing I easily could be and all
I'm saying to you is like some of that
has to be in the price given uh you know
the sort of the the I mean it's just
kind of opening up the terminal
here and you know Nvidia is down
massively from the peak so I guess you
know we peaked at 149 on January 6th
we're at you know 94 lakh So like
that's, you know, kind of a garden
variety semiconductor peak to trough
stock correction already. If this gets
really nefarious, could it go in half?
Sure. So I'm looking at if I'm looking
at this thing, I'm thinking, all right,
maybe it has 15 to 20% downside and 80
to 100% upside and a two to threeear
view for the best company with like a
genius CEO and a product area that grows
above GDP. So like it's you definitely
have to like it now more than you did
three months ago. Okay. All right. What
about the ad-based uh companies? And
we're going to get to Apple in a second.
I guess we're building up to the big
one. Uh here's Ben Thompson on Meta,
Google, and Amazon. All the advertising
based businesses. Meta Google and Amazon
will also be negatively impacted. Uh
lots of cheap products means lots of
advertising and lots of products on
Amazon specifically, much of which could
disappear.
Yeah, that makes sense to me. I mean,
you know, two two things there. I mean
one is
um advertising is economically sensitive
and a GDP slowdown or recession if
that's where we're headed that that
business is going to slow and then two
like Amazon while it's a a multiaceted
company and AWS has been an amazing um
business they still are like Walmart
size now in terms of total revenue like
they sell a lot of products to the
consumer they're not immune from a
consumer correction so when Walmart guys
the revenue down I sort of have to
assume prata or closer parata that's
going to slow down their consumer spend
part of what they do. They're just
they're 2% of the US GDP or whatever
alone in terms of revenue dollars. So,
right, they're not immune from that. So,
yeah, that makes sense to me. And I I
and I
think again and not to not to be the
bulliant, you know, stock American, you
know, buy lunch kept grow, you know, but
to me like maybe some of that's in the
price because Amazon stock has also
fallen off a cliff, right? So I'm not
saying it's all in there, but and I want
to get to how I'm thinking about that,
but Amazon was at 242 on February 5th.
It's at 163 now. It's down a third. Is
that is that a year or two of earnings
for the company? Yeah, kind of. Right
now, I'm not saying it started at the
perfect valuation where it was in
January because he had a lot of optimism
after the election and all that, but
it's it's it's kind of down to the lows
of where it was in 2024. And you know,
maybe that's reasonable based on what we
know so far, particularly if we're going
to get um you know, less negative news
on tariffs going forward and we're going
to start thinking more about taxes and
regulation and those things being
beneficial to companies and and and
lower rates driving a more optimistic
kind of view. So that I think that's the
debate, not whether you know ad spending
slows and and consumer spending slows
when um you know when the economy slows.
I mean I just saw a tweet that Amazon is
the cheapest it's been in the past
decade.
That's crazy. Yeah, this has been a big
big correction. I mean look, you know,
you have to believe the forward
estimates and I think right now nobody
believes the forward estimates because I
don't think this is a growth scare. I
think that growth is actually slowing.
So scare implies like you're wrong and
you shouldn't be scared. Like things are
slowing and they're going to slow and
there's a soft patch for sure if not
something worse than that already based
on what's happened. But so I think what
reason the stock is down is because
nobody believes Amazon's got 10% revenue
growth in there for 2026. Nobody
believes that. Right. People think
there's a chance it's zero or whatever.
Negative. Yeah. Right. Right. Or Yeah.
So I'm I'm currently saying your 27
number, you know, your 26 number is not
your 27 number. Like you lost a year of
growth, but it could be worse than that
if we stay for, you know, a few months
doing this. And I think that would make
the reset not cheap, but just sort of
like average on 27 or 28 earnings. And
that's the debate. And the answer is I
don't know. Okay. Right. So, I feel like
if I was lucky enough to be shorting a
bunch of these lower quality companies,
it's tempting to cover some because, you
know, you can get run over if if you get
some more positive commentary. On the
flip side, I think there's certain
consumer businesses that like there's
already going to be a ton of damage. So,
like the kind of research we're doing is
looking at like China products you can
buy at Target and Walmart and Costco
today and then seeing what the price is
going to be next week, later this week,
and see like how quickly, if if at all,
do the prices come up, right? like
there's ways you can try to get at this,
but um I I guess what I'm convinced of
because of the fact that 19 the last 20
times when the market did recover tech
work because semis have sold off so much
and because they ultimately are growing
faster relative to the economy than they
did previously that semis will work when
the it recovers and you just have to ask
yourself like do I buy you know uh
semicap equipment because it looks
optimally cheaper you know or how do I
how do I play this right that's that's a
good debate all right let's quickly talk
about Apple and then the market has just
opened as we're uh talking so and it
looks ugly. So we'll talk about the
market more broadly. Um but first Apple
all right here is what Apple is dealing
with on uh tariffs. So in India where
Apple this is from Mark German at
Bloomberg where Apple is increasingly
building iPhones and AirPods there's a
26% tariff. Vietnam the company now
makes AirPods, Apple iPads, Apple
watches and Macs 46%.
Malaysia, Apple's producing max 24%.
Thailand, uh the company is also making
max 37%. Ireland, which is within the
EU, gets a 20% tariff. Uh Apple produces
some iMacs there. Indonesia, where Apple
is going to start making Air Tags and
AirPods Max, 32% tariff. We also know
China, where it has a lot of production.
I think it's a total of like a
54% tariff.
Um, what is going to happen to Apple? Be
bet. Yeah. Well, let's let's start let's
start there. What is going to happen to
Apple?
Well, you know, again, um, I think
Apple's more impaired than some of the
other business models are. I certainly
think it's more impaired than Nvidia.
Um, you know, with what I know now, the
stock is also down, you know, what 260
to 170. So, it's also kind of in that
one-third
correction. M look, Apple doesn't really
grow its net income a ton. I think if
you look back the last 10-15 years, its
net income dollars have grown less than
around 10% peranom. So, it's almost
barely been a growth company. It's it's
it's, you know, value's gone up because
they've converted from hardware to
software and bought back a ton of stock
and other stuff. So, you know, I I I
don't you know, it's really hard to have
a differential view on a company like
this versus consensus, but um you know,
but I think they they appear more
impaired. I could see the logic that
look like it all comes down to like your
Apple Care and you're going to keep your
phone a little bit longer. So maybe it
just delays the phone um you know
replacement cycle a little bit. Uh
particularly because people weren't
super excited about the Siri AI
enhancements or other things that would
have stimulated um I think you and I
were on the air once where you were
being somewhat critical of those
enhancements originally like a few.
Yeah, I remember that. I had gotten like
the initial beta roll out and uh you
know it was like the first roll out of
Apple intelligence and I was like I was
like that's an interesting point. Yeah.
U so you know so so I think but you know
you I think it's going to hurt some of
the peripheral business like look look I
for people who who aren't watching like
I'm holding up the you know the dental
uh the dental floss size air. It's kind
of a bad product. Okay. I mean, so often
when I'm talking to somebody, which
basically means my head of sales or my
wife, uh, they they can't they can't
hear me, right? Or they seem to be um,
you know, so it's not a great product.
They don't last very well. I think this
is my seventh or eighth one. So I I you
always got to get the Apple Care on the
AirPods. I get I get the Apple Care and
I I think that helps their business
model, but like I'm not sure I'm not
sure that the product I I'll get another
one, you know, I may switch to something
else. So, I I think it's going to be bad
for their growth rate. And um and even
if this stuff is
um you know, removed or or this is the
the peak of it, it gets worse. I I could
see this like clipping your long-term
growth assumption a little bit for the
company, you know, structurally. Yeah.
Yeah. It's uh I think without a doubt
and they're going to have to raise
prices. This is from Ben Thompson again.
It's expensive already, too. Yep. It's a
lot of money. and he says Apple will
probably face little choice but to
substantially raise prices. That has the
direct problem of leading to fewer sales
even if iPhone demand is probably fairly
inelastic and the secondary problem of
decreasing the market for Apple's
service business which is its primary
source of growth. That is a ugly picture
for Apple. Yeah. Look, they're they're
my my my kids who are all in college all
have like Apple uh laptops and Apple
phones and like I I I at work like we we
obviously kind of go more in the
Microsoft Curitu. Um but
like you can buy like a decent Lenovo
laptop for less than $1,000 and it's
3,000 for an Apple one. Like the the
price premium for their products is
massive. And I'm not sure people are
going to look around and say, "I'm going
to buy all these products at these
prices, especially if they try to raise
it." I think they will bump up. I don't
think the in inelasticity is that
ubiquitous. I know for me, like with my
own kids, when they are carrying their
phones around, I'm like, "You're holding
If I told you you were holding like
$1,100 and $100 bills, would you be more
careful, you know, dropping that thing
on the sidewalk?" Like, it's it's it's,
you know, they're exp I I think of them
as like expensive computers are carrying
around. Definitely. And I think I'm in
a, you know, better shape than the
median American or whatever. I I I think
it's a problem. I I I do. Mhm. But you
know what the problem with our logic
right now is? We're frothing up on
negativity. And the stock went from 160
to 260 from April to January. We could
have said all the exact same things. So
I think this tariff thing is just bad
for their growth rate and it definitely
is going to cause like a a delay to any
cycle improvement. They need a they need
another leg up in technology. And that's
why I pointed out your your impression
comment a few months back of like it
doesn't seem like there's anything
enticing. I already have three cameras
on the back. Do I need five? Like I
don't know. I don't know what's going to
entice me to get a new one. Yeah. So the
S&P the market just opened. The S&P 500
dropped off the bat. I think it was down
5%. It's now come back up a little bit
to 2.8% down. Um Adam, like is there a
put here? Like is there a is there a
place where we see the administration
say enough? What we wrote in our note to
um our clients uh is I'm watching
carefully the financial conditions index
and the VIX. If you take these back to
like the more intense points that we've
seen in prior cycles and you kind of
loosely say how much are we down so far?
If it gets back to those more severe
points, how much more can we go down?
This was before today's price action. It
seemed like 6 to 7% more lower. So, if
we're kind of halfway there already, I
think every investor is looking around
saying, you know, all right, I got 3% 4%
downside, but maybe now I'm back to 20
25% upside. And so, all of a sudden, I
come back in. Yeah. I think we're close
to people kind of wanting to make a
trade. I've been hesitant
um to I look, there's nothing better
than being a contrarian bow and being
right. I mean, that's the that's the,
you know, nirvana. The problem is we've
seen no behavior where companies that
guy down act well and we're heading into
an earning season with maximum CEO
uncertainty. So if you and I are running
the company, you were the CEO of CFO, we
would be doing our pregame about what
we're going to say. No way are we
letting each other guide, you know,
anything but very conservatively for
July numbers. Yeah, I mean it's going to
be ugly. I I just saw a tweet from Joe
Weisenthal at Bloomberg. This is now the
worst 3-day performance for the S&P 500
since any guesses.
Uh 87 October 1987. Nailed it. Yeah.
Yeah. I mean, holy crap. Yeah. Yeah. No,
but but you know, because you had one or
two you had one huge day that was really
bad there, but you know, I think we had
like the limit the limit issues there.
uh you know but yeah I I think that's
because the starting valuations were
kind of high and there's maximum
uncertainty and you don't it's back to
your original questions about like
what's the administration doing like I
don't think people know reasonable
people I think you and I are like fairly
reasonable we're trying to think about
it like we don't really know righta that
uncertainty is usually bad for price to
earnings like if I'm really confident I
pay a high price to earnings because I'm
confident in the future growth and the
stability of the growth but if if I'm
not that confident I should pay a lower
price earnings for. And I think that's
this is like case in point right now.
And and you know what we offered in our
note to investors was like look there's
some consumer companies now that like
everybody loves that trade at really
high multiples still like are you sure
Chipotle they should trade at 37 times
earnings cuz if they don't grow like
it's not so it's not just in tech it's
like across the market there's a lot of
you know the travel data is falling
apart like there's a lot of stocks that
could still go down a decent amount
because their valuation despite the
correction is still pretty high. Yep.
All right. So this is not investment
advice just forformational purposes but
are you buying or selling at this point?
So what we told our investors it's still
a little bit too early that I just need
to see how much the numbers are coming
down in April earnings and or any stocks
that guide down where the stock does not
go down. as a former semiconductor
analyst, that was the that was the go
signal, baby. Like, Intel guy's down and
stocks flat stacks stocks unchanged.
Then you're like, okay, bad news is
fine. Then, you know, good news
eventually is going to be good. And but
so far, like, think about any company. I
mean, Micron a couple weeks ago, it just
got like eviscerated on their on their
on their inventory, right? Like, so I'm
looking I'm focused a lot on inventory
and capback. Semi work on inventory to
sales. So, if the inventory peaks and
comes down, I don't think that's going
to happen. I mean, look at Micron's like
a good example. Like, you know, the
stock was uh over 100 bucks uh three
weeks ago. It's at 61 now, right? So,
you know, so I I need a company to miss
and um and and and understand exactly
what the management teams are thinking
and then I need to see the market
reaction for me to get in there. Sure,
if we get some noon comment that where
we're now going to take a pause,
everything's going to reverse and rip
higher, but I still think that that
damage will be done um on the earnings
for the next quarter or two. And I think
that's what makes me still a little
cautious. If somebody has a longer term
horizon, then yeah, I think you'll be
fine. Okay, Adam, before we head out, I
want you to shout out a little bit about
what you do and where people can find
your work. Thanks, Alex. Yeah, so for
individuals or financial adviserss, you
should just go to tvectoresearch.com.
Tri vectorresearch.com. We sell uh
several times a month we write insights
uh offer ETFs, ETF analysis. So if you
if you like an ETF, we decompose what
you're exactly getting videos and also a
monthly zooms where people ask me
questions. It's a 100 bucks a month,
1,200 bucks a year. Uh I just launched
that business last month. And then our
core business is for institutions called
Triberry Research, which probably people
can go to the site and check out. So,
uh, we're also on X and on LinkedIn and
all that stuff. All the stuff.
Appreciate it. Well, Adam, great to see
you. It's always fun to see you on set
and it's great to have you here on the
show. So, thanks for coming on. See you
soon. All right. Thanks. That would be
great. All right. All right, everybody.
There you have it. The impact of the
tariffs and where we're heading next.
We'll see you on Wednesday for an
interview with Google Cloud CEO Thomas
Kuran. All right, that'll do it. We'll
see you next time on Big Technology
Podcast.