Why Morgan Stanley says Nvidia stock is still a 'top pick' under Trump's looming tariffs threats

• Nvidia might be able to easily weather Trump's trade war, Morgan Stanley said.
• The bank said it believed the impact of tariffs on Nvidia's business could be "minimal."
• Demand for Nvidia's chips is strong, and the company could work its supply chain around duties, it said.

Trump's escalation of his trade war has dragged down the market's highest-flying stocks— but there's good reason to think that Nvidia could ultimately be relatively unscathed in a trade war.

That's according to Morgan Stanley, which called Nvidia its "Top Pick" in the market on Thursday, even as Trump doubled down on his tariff threats on China and caused the historic sell-off in stocks to accelerate.

Semiconductors were left out of Trump's "Liberation Day" tariffs. But tariffs on chips could potentially be on the table in the future, Morgan Stanley said — one thing that's clouding the outlook for mega-cap tech stocks, which have sold off heavily in the last week.

But, even if tariffs are implemented on chips, Nvidia looks like it could face "fairly minimal" consequences from those duties, in part because demand for its chips is so strong and because the firm has some flexibility with its supply chains, analysts at the bank said.

"NVIDIA remains our Top Pick with the undeniably positive GPU data points and an inference market clearly starved for GPUs across multiple hyperscalers. We think sustained AI spend and NVDA's relative supply chain flexibility will help them outperform, even in a higher tariff environment."

Nvidia's chip hype

Morgan Stanley said demand for Nvidia's chips is booming, largely due to the "tight" capacity for large language learning models to make new predictions and inferences. That's driving strong demand for Nvidia's products, even older-generation chip models like Hopper, it added.

Nvidia reported record revenue of $39.2 billion over the last quarter, up 78% year-over-year.

CEO Jensen Huang has also said that demand for Blackwell, Nvidia's latest chip, has been "insane."

"Our industry contacts are generally unconcerned by the tariffs, because demand is strong, Blackwell is sold out, and demand is quite price insensitive," the Morgan Stanley analysts added.

Supply chain alternatives

Most of the framework for some of Nvidia's products may already be in North America. That means important components may not face tariffs at all, given the US's recent trade deal with Canada and Mexico.

Morgan Stanley said it believed most of the builds for Nvidia's supercomputing platform, GB200, were likely already in North America. In a previous note, analysts pointed to how Hon Hai, one of Nvidia's partners, said it would boost its capacity for GB200 severs this year, which the bank said could be completed in a facility in Mexico.

Bianca boards, one component of the GB200 platform, could also potentially be built in Mexico, given the recent "significant ramp" of capacity for the boards in the nation, analysts added.

Other Nvidia partners, like ZT systems, could also potentially build GB200s in facilities in the US, the bank said.

That's lowering tariff risk for Nvidia, though analysts noted that the stock could still be vulnerable in the event of a recession.

"That said, NVIDIA seems among the more protected companies, and will have minimal direct impact," the bank said of tariffs. "But the type of recession also matters, as demand for GPUs remains resilient - and we would say risks to that come more from the financing side than from anywhere else," they later added.

Nvidia shares have been hit harder than the overall market since Trump plowed ahead with his latest tariff plan in early April. Shares dropped as much as 14% in the first two trading days following Liberation Day, compared to the S&P 500, which dropped as much as 10% over that timeframe.