As trade tensions between the U.S. and China persist, Morningstar Analysts suggest that investors may find greater stability in software companies like Microsoft and Adobe compared to hardware-dependent firms. In a recent note, the Analysts highlighted that Microsoft carries limited exposure to retail trends, advertising volatility, hardware cycles, or physical supply chains. Adobe was similarly praised for its consistent market position and long-term competitive strength. These factors make both firms less vulnerable to potential trade disruptions, unlike companies more reliant on imports and physical components.
Tariff risks remain high for tech firms such as Dell, HP, and Apple, which depend heavily on hardware products. Morningstar estimates that around 60% of smartphones and personal computers are imported from China, placing these companies at greater risk under U.S. trade policy shifts. President Trump recently raised import taxes on Chinese goods to 145%, prompting a retaliatory 125% tariff on U.S. goods from China. Although some tech products are currently exempt, the administration has indicated that more tariffs could be introduced soon. With this backdrop, software firms appear better positioned to weather trade-related uncertainties, offering a more stable option for investors seeking reduced exposure to geopolitical risks.
