These Semiconductor Stocks To Face Least Tariffs Impact Compared To Intel

The first-quarter semiconductor earnings parade kicks off with ASML Holding ASML on Wednesday and Taiwan Semiconductor Manufacturing Co TSM on Thursday, followed by the U.S. semi and semicap peers in the following week.

For U.S. chip vendors, BofA Securities analysts Vivek Arya and Duksan Jang expect first-quarter results to beat as their original outlook was likely conservative and tariff-related pull-ins created a better demand environment.

However, the second-quarter outlook could be in line as companies could widen the guidance range.

Also Read: Applied Materials, Lam Research, KLA Drop Amid Fresh Trade War Fears, Revenue Risk

Regarding tariff impact, Arya and Jang expect U.S. chip companies to follow the example of early reporting companies Taiwan Semiconductor, ASML, Texas Instruments Inc TXN, and Lam Research Corp LRCX.

The analysts generically express concern on second-half demand headwinds and quantified gross margin headwinds from inflationary supply chain movements (such as Nvidia Corp NVDA and Advanced Micro Devices, Inc AMD) and higher U.S. sourcing.

Overall, semi-industry overhangs could persist pending clarity on new sectoral tariff rates (next several weeks), China retaliation, U.S. reciprocal tariffs, and AI diffusion rules (May 15).

On the positive side, despite some downside to estimates, valuation has become more compelling for high-quality areas in cloud/AI (Nvidia, Broadcom Inc AVGO), design software (Cadence Design Systems, Inc CDNS, Synopsys, Inc SNPS) and semicap (Lam Research, KLA Corp KLAC).

The analysts laid down two potential scenarios, which are modest tariff impact and dire tariff impact. Their modest scenario aligns with limited China and reciprocal tariffs, while the dire scenario implies the implementation of specific sectoral tariffs on semis/electronics (tariff rates not yet announced).

In a modest scenario, tariffs could drive roughly ~4% hit to calendar 2025 sales and ~6% hit to calendar 2026 versus current consensus, with EPS declines mostly ranging between 5%-25% (12%-13% average) inclusive of 150bps gross margin hit.

In a dire scenario, estimates could be further pushed down, with a 9% and 12% sales decline in calendar 2025 and 2026 and EPS declines mostly ranging between 15%-50% (25%-30% average) inclusive of a 500bps gross margin hit.

For revenue impact, the analysts noted companies with AI/cloud/industrial exposures to fare better in a potential tariff-induced demand downturn.

At the same time, those with consumer/auto are at greater risk. Nvidia, Lam Research, Cadence Design Systems, Synopsys, and Applied Materials, Inc AMAT are among the companies with the least potential sales impact (at -1% to -6% sales impact), while Arm Holdings ARM, Intel Corp INTC, NXP Semiconductors NXPI, ON Semiconductor Corp ON could fare worse (at -7% to -9% impact).

Importantly, even under the above distressed EPS scenario (dire tariffs), Nvidia, Micron Technology, Inc. MU, Synopsys, and Marvell Technology, Inc. MRVL have a 30%+ potential upside to historical P/E or PEG multiple at current stock price.

In a modest tariff scenario, the EPS hits of 12%-13% (2-2.5 times sales) are well below the 30%-40% reductions the analysts have seen in prior market downturns. However, the primary concern is PE multiple compression due to enhanced market risks.

The SOX index is currently trading at ~18 times forward PE, below the broader SPX at ~20 times, though above the 12-14 times PE at prior semi-industry downturns. Notably, the SOX index has more than given up the ~20% PE premium it gained during AI-fueled stock gains in calendar 2023 and 2024.

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