Morningstar

Apple: Another $100 Billion Looks to Be Enough to Avoid Tariffs

The announcement fits with our expectations for Apple to earn a long-term tariff exemption.

The Apple logo, taken at the Apple Store on 5th Avenue in Manhattan.
Sven Hoppe/picture alliance via Getty
Securities in This Article
Apple Inc
(AAPL)

Key Morningstar Metrics for Apple

Apple AAPL announced an additional $100 billion in US investment, primarily in manufacturing, at the White House on Aug. 6. This brings the firm’s total commitments to US investment during the Trump administration to $600 billion. New investments focus on semiconductors and glass for iPhones.

Why it matters: We expect this announcement to secure a long-term exemption from US import tariffs. Apple holds significant manufacturing exposure in China and India, and we believe it needed to placate the Trump administration with US investment to avoid costly tariffs.

  • We’ve estimated a roughly 15% earnings risk for Apple from tariffs. All US-bound iPhones are manufactured in either India or China. Apple’s primary products have been exempt so far, and a long-term exemption will allow Apple to keep its profits without raising prices.
  • These US investments are not wholly incremental. Apple has long utilized US manufacturing for cover glass from Corning, specialized semiconductors from Broadcom, and other products. We see the investment announcements as focused on expanding Apple’s existing US supply chain.

The bottom line: We maintain our $210 fair value estimate for wide-moat Apple, as the announcement fits with our expectations for Apple to earn a long-term tariff exemption. Shares rose 5% on Aug. 6 on the news, and they look fairly valued to us.

  • Apple still faces minor tariff risk on non-core products like spare parts. These were a roughly 100-basis-point headwind to gross margin in the June quarter. This investment should help Apple avoid more significant tariffs on semiconductors and electronics.
  • iPhone unit sales remain Apple’s primary valuation driver, and we observe iPhone growth slowing versus historical levels. We believe Apple needs an improved AI software strategy to spur improved iPhone unit sales growth.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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