Nvidia Corp., based in Santa Clara, California, is a visual computing company with worldwide operations and markets. The company operates through two segments, Graphics and Compute & Networking. The company's four main markets are gaming, professional visualization, data center, and automotive. In calendar 2020, Nvidia completed the acquisition of data-center connectivity leader Mellanox.

Tariffs Could Hit Differently this Time The second Trump presidency has moved faster than the first to enact significant policy changes that are reshaping the federal government, immigration policy, and a myriad of other areas. During his campaign, the president promised new tariffs. Some of these are now being rolled out, while others appear subject to negotiation. Because the tariffs are mainly in a pending phase, economists have focused on other risks and opportunities from new policies. Immigration has been a major source of labor force growth in recent years, but fewer immigrants might keep unemployment low. The shake-out in federal employment has been devastating to those caught in the cross-hairs, but even big cuts in the federal workforce would return it to levels seen just a few years ago. Tariffs risk rekindling inflation, many economists agree, while noting that inflation is not a certainty. If companies are willing to absorb most of the higher costs, consumers may feel only moderate pain. If companies pass along most of the higher costs, consumers will see higher prices almost immediately. Proponents note that the first round of tariffs enacted beginning in 2017 did not cause immediate inflation. Economists and scholars will long argue whether that first round had anything to do with the supply-chain crisis that ultimately contributed to inflation. The COVID-19 pandemic sits smack in the middle of this timeline and will forever complicate any clear analysis of the chain of events that ultimately led to the worst inflation in 40 years. The focus on the risks of tariffs triggering new inflation may be missing a larger point. U.S. consumers are still in the grip of existing inflation, and many consumers particularly in the lower tiers of the economy, appear tapped out. If tariff-sensitive companies decide to pass along the bulk of these costs rather than absorb them, instead of (or alongside of) rising inflation, we may see a slowdown in consumer spending. And with the consumer driving approximately 70% of U.S. GDP, that could send total GDP growth below the 2% level of 4Q24. The Pre-2017 U.S. Consumer Argus President John Eade has identified the passage of Brexit, even more than the election of nation-first world leaders, as marking a key turning point in global relations and world trade. Prior to Brexit, much of the world was operating in a period of globalization that stretched back to the millennial turn or even before that. In this period, relatively free trade enabled developed countries such as the U.S. to effectively 'import deflation.' U.S. consumers benefited from relatively inexpensive goods, with prices that often were lower than those for the goods they displaced. The other price paid was steep, as high-quality jobs were lost to overseas relocation. The consumer price index captures this benign pricing environment. In 2000, the Consumer Price Index was 172.2 (the baseline was established at 100 in 1982). By 2024, the CPI was 313.7. Using a simple compound average annual growth rate (CAGR) calculation, the CPI appreciated at an average 2.5% annual rate over the 2000-2024 period. In the decade preceding the first tariffs in 2017, the consumer really had it easy. From 215.3 in 2008 to 245.1 in 2017, the CPI grew at a 1.5% CAGR. The Great Recession is at the beginning of this period and, like COVID-19, introduces a knotty complication into the calculation. The main point is that inflation in this period averaged a full half-percentage point below the Fed's 2% long-term target range. As noted, the period following 2017 included the supply-chain crisis and a global pandemic, culminating in withering inflation. From 245.1 in 2018 to 313.8 in 2024, the U.S. consumer price index grew at a 3.6% CAGR. That includes some relatively benign years such as 2020 (1.2% CPI growth) and some really nasty periods such as 2022 (8.0% CPI growth). The point is that goods and services prices are up substantially from the last time America embarked on a significant round of tariffs. The 2025 Consumer Every U.S. consumer has felt the pressure of inflation over the past five or six years. Those on the bottom are feeling it more, however. The bifurcation between the upper half of consumers and the lower half has never been more pronounced. And the culprit once again is inflation. Any Economics 101 textbook likely explains inflation by examining what it does to goods prices. The inflation that kicked into high gear in 2022 has been characterized by particularly severe and sticky services inflation. Rents have gone up severely (and continue to rise), representing a larger and larger chunk of renters' take-home pay. Prices for all kinds of insurance, including vehicle insurance, have appreciated more and faster than overall inflation. Price for food and other necessities are also up sharply. Lower-tier consumers are severely strained by this burden and have less and less available for discretionary spending, from restaurant meals to laptops. If you go to Walmart for a first-hand glimpse of this reality, you might be surprised at all the nice new cars in the parking lot. Walmart has been gaining higher income shoppers in recent years, and the trend appears to be accelerating. In May 2024, Walmart CEO John Rainey noted that the chain was seeing growth across income cohorts, 'with upper-income households continuing to account for the majority of share gains.' Walmart defines upper-income as households with more than $100,000 in income. That trend was also evident when the company reported 2024 holiday-quarter sales in mid-February 2025. Walmart management also warned that it expected fiscal-year profit growth to slow, as the company would not be 'immune' from tariffs on Mexico and Canada. Upper-income consumers flocking to Walmart is a sign that no consumer is immune to the damage done by inflation. Enactment of new 10%-25% or even higher tariffs on major trading partners risks causing a slowing in consumer spending across the board. Conclusion While there is no certainty on the timing and magnitude of tariffs here and worldwide, we expect impacted companies to respond with agility and flexibility as a means of maintaining business activity levels and retaining customer relationships. The practical implication is that companies will 'eat' some portion of tariffs, to the detriment of margins. Multiple factors could mitigate the worst impacts, however. The first round of tariffs, the pandemic, and the supply-chain crisis all awakened Americans to the need to lessen reliance on outsourcing and to bring production of goods closer to home. The CHIPS & Science Act has encouraged the on-shoring of U.S. technology production, and the Inflation Reduction Act has used government resources to encourage domestic production of green energy solutions. We continue to monitor risks and opportunities in the economy related to meaningful policy changes. Our base case remains that the economy will continue to grow in the low-2% range, unemployment will remain relatively close to current levels, and S&P 500 earnings growth will accelerate in 2025 from 2024 levels. Putting that all together, we believe the S&P 500 can appreciate in the 'normal' 8%-12% range in 2025, with leadership potentially shifting away from traditional growth sectors and toward cyclical, income-sensitive, and defensive sectors.

Nvidia is a leading developer of graphics processing units. Traditionally, GPUs were used to enhance the experience on computing platforms, most notably in gaming applications on PCs. GPU use cases have since emerged as important semiconductors used in artificial intelligence. Nvidia not only offers AI GPUs, but also a software platform, Cuda, used for AI model development and training. Nvidia is also expanding its data center networking solutions, helping to tie GPUs together to handle complex workloads.

We expect S&P 500 earnings to grow 12% this year and like companies that increase their dividends at a 10%-plus rate. How does the AI marketplace stack up against those metrics? Pretty well. Argus has derived a model of the size and scope of the global AI industry, based on our coverage of major publicly traded players and most mid-tier players, along with our industry knowledge of private players. We estimate that global AI industry annual revenue amounted to $250 billion in 2024, and expect that to grow at a 40% CAGR through 2030, when total revenue is forecast to reach $1.8 trillion. The emergence of China's DeepSeek, which caused a broad selloff in AI stocks, is a reminder that this space is dynamic and unpredictable. DeepSeek is reportedly inexpensive and powerful in achieving certain AI tasks. While pricing is important, companies in the AI space prioritize relationships, continuity, security, and reliability. The top priority for companies using AI delivered as-a-service across cloud is to ensure that delivery is secure, fast, and reliable -- and adding new vendors entails risk. U.S. government policy is highly likely to prevent wide dissemination of Chinese AI models in enterprise technology implementations in the U.S., given risks of "back doors" to Chinese military and intelligence. Non-U.S. nations are largely following similar policies, which should inhibit acceptance of Chinese AI models worldwide. Finally, AI hardware leaders such as Nvidia and AMD also offer GPU software libraries, model training, and inference services tailored to specific enterprise AI applications. The AI market is large and growing, and new entrants are expected to continue to disrupt the market.