President Donald Trump's import tariffs have been the big subject for investors in recent weeks, with any new announcement guiding the market's direction. And technology stocks such as the "Magnificent Seven" have been particularly vulnerable to the news since they rely a great deal on international production of raw materials and finished goods. In fact, their cost structure depends on manufacturing in countries that have specific infrastructure and a particular economic backdrop. This offers U.S. tech giants the production capacity they need at a low cost.
The Magnificent Seven stocks led gains in the Nasdaq Composite last year, but today, these tech players are pushing the index lower amid concerns about how Trump's tariffs will impact them.
Though Trump in recent days announced an exemption from tariffs for electronic equipment such as chips and smartphones, the president indicated this exemption may not last forever. So, the risk of duties remains. Each Magnificent Seven player is likely to be impacted to a certain degree, but my prediction is one particular stock is the safest of the bunch during the tariff turmoil.
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Tariffs and tech stocks
Trump earlier this month launched tariffs on countries around the globe -- in many cases at levels of more than 20%. But last week, he hit the pause button on the plan, offering the U.S. and other countries 90 days to negotiate.
But he also increased the U.S. tariffs on products from China to 145%. This was bad news for tech players as China is a key country of production. But good news came shortly thereafter with the exemption of electronics from these tariffs. Even if the exemption is temporary, it suggests that any future tariff applied to these products may be lower and more manageable for companies.
It's key to remember that even though tariffs are applied to a particular country, this country isn't the one paying them. Instead, the company or person importing the product into the U.S. pays the fee.
Now, let's consider my prediction. As I said earlier, every Magnificent Seven player -- from chip companies to software makers -- is likely to feel the impact if Trump reinstates some sort of tariff for electronics products. But in my opinion the company that may be the least vulnerable is social media giant Meta Platforms (META 3.37%).
NASDAQ: META
Key Data Points
Meta's main moneymaker
Meta's main revenue driver right now is advertising across its family of apps, which include Facebook, Messenger, WhatsApp, and Instagram. In the most recent quarter, ad revenue came in at $46 billion with total revenue of $48 billion. Advertisers flock to Meta to advertise across these apps because they know that their target audience spends so much time on them. More than 3.3 billion people worldwide use at least one of Meta's apps every day.
This source of revenue doesn't involve importing a product subject to tariffs into the U.S., and that's fantastic news for Meta. That said, the company isn't completely immune to these taxes because it has been building a presence in artificial intelligence (AI), requiring the purchase of chips and other materials. And Meta has ventured into other areas such as virtual reality, producing, for example, headsets in Vietnam. This means Meta could face higher prices from suppliers and import taxes itself. On top of this, any economic slowdown following the implementation of tariffs could weigh on ad spending, hurting Meta's revenue growth. But, compared to other Magnificent Seven players, this company may face lighter headwinds.
Is Meta stock a buy today?
While Meta is well placed to dodge tariff impacts, there also are long-term reasons to buy this stock. As mentioned, Meta is a social media powerhouse, and that's generated solid revenue growth over time. Considering the company's moat, or competitive advantage, I would expect this to continue. Most users of Meta's apps stick with them because they believe their contacts probably won't all follow them over to a lesser-known app.
On top of this, Meta is making gains in the area of AI, with its AI assistant, Meta AI, the most used worldwide. This could spur advertisers to spend more, as they know users will be spending more and more time on Meta apps as they use Meta AI.
Finally, now is a good moment to buy Meta due to its valuation. It's trading at 21 times forward earnings estimates, down from more than 27 just a couple of months ago.
My prediction is Meta is the safest of the Magnificent Seven stocks to buy during the current tariff turmoil, but even if the stock doesn't take off in the short term, this player has what it takes to excel in the years to come.
