Could Nvidia Stock Go Up If Kamala Harris Becomes President?

Nvidiahis (NVDA 1.69%) the stock price skyrocketed over 800% while Kamala Harris served as Vice President of the United States. That’s a bigger gain than the stock delivered when Donald Trump was in the White House. It’s also higher than the profits generated during either of the four-year terms of Barack Obama and George W. Bush.

Granted, Harris isn’t setting government policy while she’s vice president, or fueling the Nvidia-backed AI boom sparked by the public launch of ChatGPT in 2022. But it will be a different story — for the first — if she beats Donald Trump in November. Could Nvidia Stock Go Up If Kamala Harris Becomes President?

Kamala Harris. Official White House Photo by Lawrence Jackson.

Relevant Harris policies

Harris has proposed several major economic policies since becoming the Democratic presidential nominee. She wants to cut taxes for working Americans. The vice president is trying to lower food and grocery costs in part by targeting corporate “price gouging.” Harris proposes strengthening Obamacare. She wants to address the US housing shortage by offering incentives and tax credits.

None of these propositions are very relevant to Nvidia. However, the vice president outlined some policies that could affect the chip maker. Of course, presidents must work with others to get things done, so no campaign promise or policy plan is a guarantee.

Harris wants to raise the corporate tax rate that companies pay from 21% to 28%. This would undo the tax cuts enacted during the Trump administration, but would still leave the corporate tax rate at a lower level than it has historically been. In addition, she proposed quadrupling the tax rate on corporate share buybacks.

Harris says he plans to offer new tax credits to support “critical industries of the future.” These tax credits would help, among other things, promote the construction of new artificial intelligence (AI) data centers and “revitalize America’s semiconductor industry.” She also wants to keep in place the AI ​​executive order signed by President Joe Biden, which included safeguards designed to prevent safety and security issues with AI technology.

How these policies might affect Nvidia

At first glance, you might think that raising the corporate tax rate to 28% could hurt Nvidia quite a bit. However, this is not necessarily the case. The table below shows what Nvidia’s effective tax rate has been over the last four years:

Data source: Nvidia 10-K files. The company’s fiscal year ends at the end of January. *Nvidia received more back from the government as a result of tax benefits than it paid in taxes in 2023.

Perhaps Harris’ proposed corporate tax rate hike would hurt Nvidia, but over the past four years, the company’s effective tax rate has been much lower than the 21 percent tax rate implemented when Trump was president. As the table above shows, Nvidia has demonstrated a knack for using the tax code to its advantage to have an effective tax rate that is much lower than the standard corporate tax rate. They may well continue to do so in a Harris administration.

Harris’ plans to quadruple the tax rate on share buybacks could prompt Nvidia to change how it allocates capital. The company spent $9.7 billion on share buybacks in its last fiscal year and bought back nearly $14.9 billion of its stock in the first half of the current fiscal year. Nvidia could choose to use more cash to fund dividends or reinvest in its business instead of buying back shares if Harris’ plans go through.

The bottom line, however, is that significantly higher charges on share buybacks probably wouldn’t hurt Nvidia’s business much, if at all. And while buybacks can increase the price of existing shares by lowering the total number of shares, investors could still benefit if the company increases its dividend payout or grows faster due to greater investment in its businesses.

What about Harris’ proposal to provide tax credits to support the construction of AI data centers and the US semiconductor industry? These tax credits could benefit Nvidia to some extent. However, the vice president’s plans do not include the dollar amounts involved. Without those details, it’s impossible to assess how the proposed policy might affect Nvidia.

Could Nvidia stock rise if Harris becomes chairman?

Back to our original question: Could Nvidia stock rise if Harris is elected chairman? Yes, the stock could certainly rise during the Harris administration — but not necessarily because of any specific policies Harris might implement.

Based on what is known at this point, none of Harris’ proposed policies are likely to have a huge impact on Nvidia’s business. And that’s assuming he could win enough support in Congress to enact his ideas. Every president faces the challenge of convincing lawmakers to agree to his approach. Sometimes they are successful, but sometimes they are not.

Nvidia’s fortunes depend far more on demand for its GPUs than on government policies, regardless of who sits in the Oval Office. I believe this demand will remain strong for years to come. If so, chances are Nvidia stock will go up if Harris becomes president.

Still, I wouldn’t bet on the chipmaker’s stock price rising as much as it did during her tenure as vice president. It’s a daunting challenge for any company with a market cap approaching $3 trillion to deliver a 9x return in four years.