Apple stock jumps 5% after $100 billion US manufacturing pledge

Investment announcement to help tech company avoid Trump's tariffs on semiconductors

Apple shares rallied more than 5 per cent on Wednesday after it committed $100 billion in US manufacturing, in a move that would help the company avoid President Donald Trump's 100 per cent tariffs on semiconductors.

The world's third most valuable company settled 5.1 per cent higher at $213.28, after the pledge, which would bring its total investment in the US to $600 billion in the next four years.

That helped Wall Street rally at the close. The tech-heavy Nasdaq Composite led gains, settling 1.21 per cent higher. The Dow Jones Industrial Average added 0.18 per cent, while the S&P 500 climbed 0.73 per cent.

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The White House announced on Wednesday that it will impose tariffs on "all chips and semiconductors coming into the United States", although they would not apply to companies that have made commitments to manufacture in the US, or, at least, are in the process of doing so.

Apple's decision was a "good strategic poker move for [chief executive Tim] Cook and Cupertino", where Apple is based, said Wedbush managing director Dan Ives.

The announcement came a day before Mr Trump's broader and sweeping tariffs, aimed at encouraging companies to bring their manufacturing to the US, came into effect on Thursday.

It comes following a $500 billion commitment in February that included hiring 20,000 workers.

Companies have shied away from manufacturing in the world's biggest economy due to a number of factors, most notably the high costs of resources and labour, in addition to regulatory hurdles.

That has prompted them to set up manufacturing plants overseas, where costs, labour especially, are cheaper, while also avoiding import costs for key components and materials.

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Investors have been concerned that US-made products like Apple's iPhone would force price rises that would be passed on to consumers. The current flagship iPhone 16 Pro starts at $1,000.

Labour and assembly costs for an iPhone would be at least 10 times higher on US soil, said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

"Investors were more relieved to see Tim Cook stay friends with the White House than worried about the company’s margins being smashed by the inevitably higher cost of producing iPhones in the US," she said.

"So, what will probably happen – and I think this is the catch – is that Apple will invest hundreds of billions into US factories and make sure they are highly automated to require ever less labour."

Meanwhile, the race for semiconductor manufacturing continues to heat up as companies try to keep up with the heightened demand for chips, particularly to power artificial intelligence applications amid the explosion of generative AI.

The US is positioning itself to take a leading role in the industry and fend off challenges, particularly from China.

The Chips Act – officially the Creating Helpful Incentives to Produce Semiconductors and Science Act – was enforced in 2022 to boost and incentivise US chip production.

It also aims to help revitalise the US semiconductor sector, once a major force that has since lost market share to manufacturers in South Korea and Taiwan.

"The US economy and corporate spending have proven remarkably resilient, and revenue growth for the hyperscalers has benefited significantly from AI-supported products, services and user experience," said Mathieu Racheter, head of equity strategy research at Swiss bank Julius Baer.