The threat of tariffs looms over many companies because they make anything imported more expensive. If that is the only source for products, then consumers or businesses may hold out on purchasing them to wait out tariffs in the hope that they will be reduced.
Furthermore, if products become more expensive in general due to tariffs, it could reduce consumer confidence and cause spending to drop across the board.
Many investors are worried about this, which is why the stock market has sold off so heavily over the past week. However, I think three companies can weather the storm caused by President Trump’s tariff policies, and each looks like a strong buy following the sell-off.
Many companies could (and likely will) emerge on the other side of these tariffs just fine, but I’m focusing on AI hardware suppliers, as these are the companies most affected by tariffs. Nvidia (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing (NYSE: TSM), and Broadcom (NASDAQ: AVGO) are all crucial suppliers for AI hyperscalers, and I think they will be just fine amid the tariffs.
The reason? The big AI companies can’t live without the hardware suppliers’ products. Nvidia makes graphics processing units (GPUs) that are deployed in vast quantities to train AI models and then operate them once deployed.
Its GPUs and the infrastructure that supports them are the best in the game and have little competition. If you include other competitors, they also source parts from outside the U.S., so they are subject to the same fears as Nvidia. With how vital GPUs are to the AI race, the company will be just fine.
Broadcom is in a similar business: It makes connectivity switches and custom AI accelerators (which it calls XPUs), among many other things, but these two product lines in particular are expected to provide massive growth over the next few years.
Currently, only three companies use Broadcom’s XPUs, and by 2027, this division will be pursuing a $60 billion to $90 billion market opportunity. However, four more customers are getting their XPUs up and running, which will add to this opportunity. Considering that revenue over the past 12 months totaled $54 billion, this would be huge growth.
While there are some fears centered around tariffs for these two, the push for AI supremacy is much greater. As a result, investors need to look past the short term and realize that there is still a ton of long-term potential with Nvidia and Broadcom.
Taiwan Semiconductor (or TSMC for short) is a major supplier for both of these companies. Neither of them can actually manufacture chips, so they have to get them from somewhere, and TSMC is the best option available for high-end chips.
President Trump threatened to levy a tariff on Taiwan, but that threat seems to have faded away after TSMC announced another $100 billion investment in U.S. semiconductor production facilities.
Taiwan’s president and the CEO of Taiwan Semiconductor denied that President Trump forced this expansion, but the end result is the same: Trump got what he wanted by having TSMC move more of its production to the U.S.
So, one of the most crucial suppliers that might have driven up prices for Nvidia and Broadcom products doesn’t need to worry about tariffs right now — and these three are free of the burden of tariffs, at least right now.
Until the market is convinced that the threat of tariffs is gone, these three will likely continue to sell off, which gives investors a huge opportunity to buy shares for a fantastic price.
Following the sell-off, these three find themselves at price points rarely seen over the past year.
First, Taiwan Semiconductor looks ridiculously cheap at 18.8 times forward earnings. It’s one of the world’s most important companies, yet it trades at a lower multiple than the broader S&P 500 (SNPINDEX: ^GSPC), which has a 19.8 forward earnings multiple. This pricing mismatch doesn’t make much sense, and investors should pounce on the opportunity.
Nvidia is also quite inexpensive considering how vital its GPUs are, and the decline from where it spent most of 2024 is another golden opportunity to buy shares on the cheap.
Lastly, Broadcom is the most expensive, but if the XPU market takes off as predicted, this could be a bargain price for the stock.
All three stocks look like fantastic buys, but investors must have a long-term mindset. The companies will likely be successful investments over a three- to five-year time frame. But there could be some more short-term pain since it’s impossible to call a market bottom in the middle of a sell-off.
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Keithen Drury has positions in Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
