Government policies matter for companies. This is especially true for a global technology powerhouse like Nvidia (NVDA -0.41%).
The two major presidential candidates, Democratic nominee Kamala Harris and Republican nominee Donald Trump, have very different policy proposals. The next occupant of the Oval Office could make a difference in how well Nvidia's business and stock performs over the next four years. Could Nvidia stock soar if Trump wins in November?
Trump's proposals that could be especially relevant
There are many ways that policies implemented in a second Trump administration could impact Nvidia. Let's look at four of Trump's proposals that could be especially relevant.
First, the former President wants to extend the corporate tax cuts implemented during his first term that are set to expire in 2025. Those tax cuts lowered the corporate tax rate from 35% to 21%. Trump has also proposed further reducing the corporate tax rate to 15%.
Second, Trump strongly favors implementing steep tariffs on imported products. He said in September, "Tariffs are the greatest thing ever invented." The GOP presidential nominee wants to impose a 60% tariff on all imports from China and a tariff of up to 20% on imports from other countries. In addition, Trump has called for even higher tariffs in specific cases, including threatening a 100% tariff on products made in Mexico.
Third, Trump pledges to push hard to reduce government regulations on businesses. He said in a speech to the Economic Club of New York on Sept. 5, 2024, that he intends to eliminate ten existing rules for every one rule added.
Fourth, the Republican National Committee's platform (which was crafted by the Trump team) stated that the Executive Order about artificial intelligence (AI) signed by President Biden would be repealed. The purpose of this Executive Order was to address the safety and security of AI technology. The RNC argued that the Executive Order is "dangerous" and "hinders AI innovation."
How Nvidia could be impacted
Corporate tax cuts could boost Nvidia's earnings, but perhaps not as much as you might think. In the first half of 2024, Nvidia paid income taxes of $5.01 billion -- only 13.7% of revenue. In 2023, the company's tax bill was $4.06 billion (12% of revenue). Both levels are already well below the 15% corporate tax rate proposed by Trump.
The former President's proposed tariffs could hurt Nvidia. Much of the company's manufacturing is currently done outside the U.S., including some in China. Nvidia would likely try to pass higher costs resulting from the tariffs on to its customers.
Many economists believe that the tariffs could cause inflation to spike. If the Federal Reserve raised interest rates to fight rising inflation, it could negatively impact some customers' spending on Nvidia's chips.
The Biden Administration's regulations limiting exports of AI chips to China have put a damper on Nvidia's business to some extent. Although Trump hasn't indicated if he would lift these regulations, his general stance toward China seems to make it likely that he would not.
Nvidia said in its 2023 annual filing that compliance with other regulations hasn't had a material effect on its operations. Further deregulation in a second Trump Administration, therefore, probably wouldn't move the needle much for the company or its stock.
However, a repeal of Biden's Executive Order related to AI by Trump could help Nvidia. In particular, it could cause tech companies to invest more heavily in developing artificial general intelligence (AGI), an area that has raised safety concerns.
Answering the question
With all this in mind, let's return to the initial question: Could Nvidia stock soar if Trump wins in November? The answer is... of course, it could. After all, the stock jumped more than 5x during Trump's first term.
As we've seen, though, not all of the former President's proposals are beneficial to Nvidia. There's no guarantee that its stock would flourish in a second Trump Administration.
Nvidia's share price may rise significantly regardless of which party holds the White House. The stock skyrocketed more than 14x during the eight years Barack Obama was president. It's up nearly 9x since Biden took office. What matters more than government policies for Nvidia is the demand for its chips. And that demand seems likely to increase whether Kamala Harris or Donald Trump is the next U.S. President.
Editor's note: This article has been revised to correct Nvidia's income taxes as a percentage of revenue for the first half of 2024 and full-year 2023.
