Stock Rally Driven by Tariff Pause and Inflation Improvements
In recent weeks, both investors and consumers have faced significant concerns. The fluctuating tariffs, ongoing trade disputes with China, and stubborn inflation have raised fears of a potential recession.
This market turbulence led to a correction, raising fears of a bear market. However, this week brought a surge of good news that catalyzed a broad market rally, particularly benefiting artificial intelligence (AI) and semiconductor stocks.
Considering a $1,000 investment? Our analysts have identified the 10 best stocks to buy now. Learn More »
AI specialist Palantir Technologies (NASDAQ: PLTR) saw an impressive surge of 18% this week. Likewise, semiconductor leader Broadcom (NASDAQ: AVGO) increased by 16.8%, chipmaker Nvidia (NASDAQ: NVDA) rose 13.3%, and chip designer Arm Holdings (NASDAQ: ARM) climbed 13%, as of 1:10 p.m. ET on Thursday.
Image source: Getty Images.
Tariff Developments Boost Stock Confidence
The most significant catalyst for the stock market rally occurred on Wednesday when the Trump administration announced a 90-day pause on most new tariffs. This pause aims to facilitate trade negotiations with 75 countries, providing investors with hope to avert a prolonged trade war, widely feared to lead to a recession.
However, the news was mixed. President Donald Trump intensified the situation with China, announcing an immediate increase of tariffs to 125%, citing a “lack of respect” from China towards global markets.
Initially, the administration’s announcement seemed to reverse its earlier strategy of imposing baseline tariffs of 10% and “reciprocal tariffs” on 86 countries, which ranged from 11% to 84%.
Positive Signs on Inflation
In another positive development, the monthly inflation report from the U.S. Bureau of Labor Statistics indicated a slight cooling in inflation. The Consumer Price Index (CPI) showed an increase of 2.4% in March compared to the previous year, down from 2.8% in February. Month-over-month prices also decreased by 0.1%.
Both inflation figures fell short of economists’ expectations of a 2.6% annual increase and a 0.1% monthly rise. The core inflation data, excluding volatile food and energy prices, increased by 2.8% from last year and only 0.1% sequentially, marking the slowest core inflation rate in over four years. While the Federal Reserve aims for a target of 2% inflation, these signs of improvement have been welcomed by both investors and consumers.
On a company level, the Trump administration has abandoned plans for an export ban on Nvidia’s H20 chip, specifically designed for compliance with U.S. trade restrictions on China. Nvidia CEO Jensen Huang negotiated these concessions during a recent meeting with Trump, where he committed to significant investment in U.S. data centers.
Investment Potential in Leading Tech Stocks
The ongoing AI revolution is heavily supported by advanced semiconductors and innovative AI models. Major tech companies are planning to invest an estimated $315 billion in capital expenditures by 2025 to build out the necessary servers and data centers for AI support.
However, potential tariffs could significantly increase the costs of semiconductors and related products crucial for AI infrastructure, as many components originate from countries subject to higher tariffs. Such cost escalations could slow down the rapid adoption of AI technology.
Prominent companies like Palantir, Nvidia, Broadcom, and Arm Holdings have emerged as benefactors of this ongoing trend, supplying chips and technological expertise fueling the AI movement. Notably, Palantir and Arm are valued at substantial forward price-to-earnings ratios of 154 and 49, respectively. Conversely, Nvidia and Broadcom appear attractively priced at 26 and 23 times forward earnings, respectively, offering a unique opportunity for investors to acquire these industry leaders at a relative discount.
Should You Invest $1,000 in Nvidia Now?
Before purchasing stock in Nvidia, consider the following:
The Motley Fool Stock Advisor analyst team has recently identified the 10 best stocks for current investment, of which Nvidia was not included. The selected stocks are poised for substantial returns in the coming years.
For instance, if you had invested $1,000 in Netflix back on December 17, 2004, based on our recommendation, it would now be worth $509,884!*
Similarly, if you invested $1,000 in Nvidia on April 15, 2005, that investment would have grown to $700,739!*
It’s notable that Stock Advisor’s average return is 820% — significantly outperforming 158 for the S&P 500. Stay informed with the latest top 10 list by joining Stock Advisor.
*Stock Advisor returns as of April 10, 2025
Danny Vena has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies, as well as recommending Broadcom. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.
