Are Semiconductors a 'Sell' After Trump Tariffs?

Business Insider

3 days ago

Trump's 100% tariff on semis and what it means… what McDonald's earnings say about the U.S. consumer… checking in on Jonathan Rose's NioCorp trade… a laundry list of winners
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In yesterday's Digest, we reported on President Trump's plan to unveil new tariffs on semiconductor companies 'within the next week or so.'
Well, that 'week or so' turned into about an hour.
Shortly after that Digest hit your inbox, Trump confirmed plans for a 100% tariff on imported semiconductors, with one big caveat – companies that manufacture chips in the U.S., or commit to doing so, will be exempt.
Apple's CEO Tim Cook stood by Trump during the announcement after Apple pledged an additional $100 billion in U.S. investment (bringing its total domestic commitment to about $600 billion) and received that exemption.
So, what does this mean? And what's the investment step?
The headline '100% chip tariff' is dramatic. But the actual policy functions more like a policy lever than a full‑blown blockade.
This isn't a death knell to the overall AI/semiconductor story or AI profits (which is why the tech sector isn't plummeting as I write Thursday). But neither is it a nothingburger.
As to how to respond, here are three guidelines:
Prioritize companies investing in U.S. manufacturing – firms such as TSMC, Samsung, Nvidia, and GlobalFoundries are expanding their U.S. operations and are in a good position to benefit from exemptions
Maintain your core AI holdings – the new tariffs don't undermine long-term demand for semiconductors. Hold your top-tier AI plays
Look past the headlines for long-term opportunity – if more drama and downward volatility is ahead of us, look for favorable entry points on AI/semi leaders selling off in sympathy
Bottom line: Though the headlines sound frightening, this is ultimately bullish for well‑positioned AI players.
Yesterday, McDonald's beat earnings expectations, but…
While Wall Street applauded the numbers, the company's tone was cautious for one main reason…
Weakness among low-income consumers.
From CEO Chris Kempczinski:
Reengaging the low-income consumer is critical, as they typically visit our restaurants more frequently than middle- and high-income consumers.
This bifurcated consumer base is why we remain cautious about the overall near-term health of the U.S. consumer.
Longtime Digest readers will recognize this 'bifurcated consumer base' and recall the term we've used within this broader conversation: the 'Technochasm.'
There's a growing divide today between the 'haves' and 'have nots' – both in the market and in our society. One of the most influential factors driving this growing divide is wealth generated from investments in cutting-edge technology and artificial intelligence, something our experts have coined, 'The Technochasm.'
This bifurcation – strength from higher earners, fragility among lower-income households – is becoming a recurring theme in earnings reports across industries. And it's a valuable clue into the true health of the U.S. consumer.
This is especially important in the wake of last Friday's jobs report – the weakest in over a year – and Tuesday's ISM data, which caused legendary investor Louis Navellier to say:
We are teetering on a recession here, folks, and I don't like to use that R word, but that's what's happening.
Can high-income earners spend us out of a recession?
I've been a part of some interesting conversations with InvestorPlace analysts that tackle whether higher-income consumers can spend enough to offset the tightening we're seeing from lower-income households.
There's some evidence suggesting this has been happening.
For example, earlier this year, credit card data showed that upper-income households were spending regularly, particularly on experiences like travel, fine dining, and entertainment.
Here's CNBC from the spring:
Lower-income earners are reining in their transactions to focus on essentials, while the wealthy continue to spend freely on perks including dining out and luxury travel, according to first-quarter results from U.S. credit card lenders…
For instance, at Synchrony, which provides store cards for retail brands including Lowe's and T.J. Maxx, spending fell 4% in the first three months of the year…
That compares to a 6% spending jump at American Express and a similar rise at JPMorgan Chase, both of which cater to wealthier users with higher credit scores than Synchrony.
AmEx said its customers spent 7% more on dining and 11% more on first class and business class airfare than a year earlier.
These consumers are benefiting from rising asset values, higher interest income, and – thanks to the AI boom – significant gains in tech-heavy investment portfolios.
But we're starting to see signs of fatigue
Let's jump to Fortune from last week:
More than half (58%) of six-figure earners no longer feel financially successful, according to a recent report from Clarify Capital…
More than seven in 10 of these high earners are now being forced to shop at discount grocery chains to save cash.
Around 74% also say they're cutting back on dining out, 54% are skimping out on entertainment, 51% are getting thrifty with buying clothes, 49% are scaling back their subscriptions, and 49% are spending less on travel…
About 85% of six-figure workers say they feel stressed and anxious due to increased living costs.
Fortune goes on to report that the delinquency rate among high-income borrowers has surged 130% over the last two years.
As to the investment implications, there are many ways we can take this
Let's briefly walk through four options.
Invest in the companies at the forefront of the technologies that will continue to explode the Technochasm
Clearly, that's AI.
But as we've been profiling here in the Digest, the latest evolution is 'Physical AI' (think robots/humanoids).
On Monday through Wednesday, we brought you interviews from Louis Navellier, Eric Fry, and Luke Lango detailing this opportunity. And they just released a new portfolio of Physical AI leaders in their AI Revolution Portfolio investment service.
Regardless of how you do it, giving your portfolio at least some exposure to cutting-edge AI is imperative.
Focus on fundamentally superior companies that are growing their earnings, despite a broader consumer slowdown
This has been the cornerstone of Louis' market approach for decades.
Earlier this week, in the same Flash Alert market update in which Louis warned of a potential recession, he also congratulated his Growth Investor subscribers on three earnings wins from earlier this week.
Here's how those stocks have performed since Tuesday:
AXON: +13%
KGC: +11%
PLTR: +9%
As Louis loves to say: 'earnings are working.'
Trade companies successfully catering to lower-income Americans
Lower-income shoppers are still buying from certain retailers, causing Wall Street to push up prices.
Our hypergrowth expert Luke Lango is in one such retailer in Breakout Trader – Dollar Tree (DLTR). After opening the trade in late-April, they're sitting on 31% gains.
These lower-income trades aren't necessarily 'hold forever' stocks, but for however long cost-conscious shoppers help drive their prices higher, stick with bullish momentum.
Refresh yourself on the valuations of every stock you own
If even higher-income consumers are beginning to pull back, earnings are likely to be next. And when earnings fall, eventually, stock prices do too – especially those priced for perfection.
So, refamiliarize yourself with the valuation of each stock you hold. Make sure you're comfortable.
(If you missed Eric's recent free research report on which expensive AI stocks he's selling today – and which stocks he's recommending to replace them – you can check it out right here.)
Coming full circle to McDonald's…
Its earnings report is a snapshot of the Technochasm in action.
Yes, certain consumers are still spending. But for many – especially at the lower end of the income spectrum – the strain is becoming undeniable.
Bottom line: When McDonald's says it's having to 'reengage' its most loyal customers through cheaper meals, we should take notice. That's a macro warning.
Checking in on Jonathan Rose's NioCorp trade
Back in July, we put a new speculative trade on your radar – NioCorp Developments (NB) – thanks to a heads-up from veteran trader Jonathan Rose.
Jonathan had just closed a 700% win on rare earth play MP Materials. And he had recently recommended a trade on NB as another early-stage name riding the same wave: U.S. demand for critical minerals tied to defense, energy, and the AI boom.
At the time, we emphasized caution. As with any speculative trade, risk mitigation is key because volatility was likely. To that end, Jonathan had recommended a defined-risk trade.
Well, the very next day, NB traded sharpy lower.
Jonathan explained that the selloff was driven by a capital raise – standard behavior for small-cap names funding their growth. He wasn't concerned for the trade.
If you took advantage of that selloff, congrats
Fast-forward to today, and NB is soaring, rapidly approaching its pre-capital-raise high.
It's up 54% from its late-July low, so if you bought on that weakness, congrats, you're likely sitting on double-digit gains.
Better still, even higher prices appear on the way…
A major new catalyst for growth
On Tuesday, we learned that the U.S. Department of Defense has awarded up to $10 million to NioCorp's Elk Creek Resources unit to support its domestic production of scandium – a rare earth metal critical for advance defense and aerospace systems.
This is a big deal.
Virtually the entire global scandium supply comes from China, Russia, and Ukraine. The U.S. hasn't mined scandium since 1969 – until now.
NioCorp's Elk Creek project is also sitting on high-value niobium and titanium, both essential for hypersonic missiles and other military applications.
The company already has binding long-term deals in place for 75% of its planned niobium output, and it just inked its largest scandium deal ever.
From CEO Mark Smith:
This is a grant, not an investment.
It shows strong U.S. government backing and how critical niobium and scandium are for defense.
In short, this is no longer just a speculative story; it's becoming big business, with real government backing.
We'll repeat ourselves from our July 16 Digest:
If you're looking for what could be the market's next major overnight winner, consider yourself in the loop.
Before we sign off, a quick 'congratulations' to Jonathan's Advanced Notice subscribers
They're on a roll right now.
Since March, here are their closed trade results:
18 trades: 14 winners, 4 losers
113.73% average return across all closed positions
169.91% average return across the winning positions
77.8%-win rate
Average trade hold period: 36 days
As we've said many times, Jonathan is one of the best traders in the biz.
To get a better sense for how and why, join him for his free Masters in Trading Live broadcasts at 11:00 a.m. Eastern time every day the market is open.
They're a great way to deepen your understanding of trading – and to see firsthand the strategies Jonathan uses to capture triple-digit gains, sometimes in just days.