U.S.-China Tariff Agreement Lifts Major Stock Indices
The three major U.S. stock indices experienced significant gains on Monday following the announcement of a preliminary import tariff agreement with China. This development has sparked renewed optimism among investors, easing concerns that had been building over President Donald Trump’s tariff strategy.
Rising fears of a trade war with China, which could severely impact the U.S. economy, appear to be dissipating. The recent agreement sets tariffs on China at 30%, a notable reduction from the previously proposed 145% rate announced last month.
Impact on Technology and Growth Stocks
This news is particularly favorable for technology and growth stocks, many of which depend on China for manufacturing and components. While the U.S. has temporarily exempted electronics from tariffs, this exemption adds an element of uncertainty.
Growth companies benefit from a thriving economic environment. Unsurprisingly, the tech-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) surged by 4.4% in response to the U.S.-China news.
Stocks to Consider Amid the Rally
Here are three top picks to buy during this Nasdaq rally:
1. Apple
While technology stocks have not yet felt the impact of tariffs on imported electronics, this situation is only temporary. This makes a lower general tariff rate on a key trading partner like China crucial. It implies that future tariffs on electronics may be manageable.
Apple (NASDAQ: AAPL) is especially sensitive to these developments. The company has been diversifying its supply chain, moving some production to countries like India and Vietnam. While this may mitigate some tariff impacts, it does not eliminate them entirely, as some imports from China will continue.
The trade agreement should alleviate some of the pressure on Apple and allow investors to focus on the company’s solid track record of earnings growth. Apple has a strong competitive advantage, evident in its loyal customer base, which has contributed to rising services revenue.
Currently, Apple shares trade at 29 times forward earnings estimates, presenting a compelling investment opportunity.
2. Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has consistently generated significant earnings, primarily through its dominant search engine, Google Search, which holds a 90% global market share. This strong position attracts substantial advertising revenue.
Additionally, Alphabet’s cloud sector, Google Cloud, has become a major revenue driver, with recent earnings climbing 28% to over $12 billion.
The company is also investing heavily in artificial intelligence (AI), which is enhancing both its search and advertising capabilities. With shares trading at 16 times forward earnings estimates, Alphabet represents a cost-effective entry point among major tech companies.
3. Nvidia
No assessment would be complete without mentioning Nvidia (NASDAQ: NVDA), a leader in the AI sector. Previous tariff uncertainties have weighed on Nvidia, given its reliance on international production. Any relief from tariff pressures is welcome news.
Nvidia has demonstrated remarkable revenue growth, and its role in the ongoing AI infrastructure buildout positions it well for future gains, particularly as businesses adopt AI solutions.
Looking ahead, Nvidia also has key events on the horizon, including CEO Jensen Huang’s keynote at Computex and its earnings report on May 28. With shares currently trading at 27 times forward earnings estimates, now could be an opportune moment to invest.
Should You Invest $1,000 in Apple Right Now?
While considering an investment in Apple, note that a reputable analyst team has recently identified ten top stocks that could significantly outperform the market in the coming years.
Historically, early investments in selected stocks have yielded substantial returns. For instance, a $1,000 investment in Netflix when recommended in December 2004 would have grown to $598,613. Similarly, investing in Nvidia in April 2005 would have resulted in $753,878 today.
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Suzanne Frey, an executive at Alphabet, is on The Motley Fool’s board of directors. Adria Cimino has no positions in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
