Trump's Election Raises Visa Concerns for IT Services Firms
However, we think workarounds exist for these providers.
Donald Trump’s election as U.S. president has caused consternation for some IT services investors, as there is uncertainty regarding his stance on visas and the IT services industry’s use of them. During the campaign, Trump flip-flopped between talking tough on the H-1B visa program, saying he’ll end it forever as a cheap labor source, and showing a great willingness for America to attract high-skilled foreign workers. Whatever the outcome, we expect offshore IT services vendors to adapt accordingly to mitigate any negative impacts from visa restrictions. We are maintaining our economic moat ratings and fair value estimates for Cognizant (CTSH), Infosys (INFY), Wipro (WIT), and Tata Consultancy Services (TCS). Cognizant remains our top pick in the IT services industry.
While temporary nonimmigrant visas such as H-1Bs are most likely in Trump’s crosshairs, we don’t necessarily expect visa changes to be easy. Plenty of resistance exists in Congress and even within the Republican party--for instance, Florida senator and former presidential hopeful Marco Rubio is in support of expanding the H-1B program. Silicon Valley lobbyists are sure to get more vocal, and we could see international political leaders becoming involved. With Trump touting himself as a businessman--he even uses H-1B visa holders within his own enterprise--a good business case from firms such as Cognizant, Infosys, Wipro, and TCS could make visa changes more lenient. Silicon Valley has been making its case for the H-1B visa program for some time, indicating a lack of skilled U.S. IT workers, and we could see a similar case being made for IT services firms in terms of getting the right engineers and designers to help their U.S.-based clients.
Andrew Lange does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
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