H-1B Policy Shock: Challenges for the Tech Industry and U.S. Stock Market Investments

Overview and Scope of the H-1B Visa

TradingKey - The H-1B visa allows foreign professionals to work legally in the United States, primarily targeting talent in science, technology, engineering, and mathematics (STEM) fields. Employers must cover fees to sponsor H-1B visa applications. The visa is allocated through a lottery system with an annual cap of 85,000 slots, while in 2025, applications reached 470,000, resulting in a selection rate below 18%. The visa is valid for up to six years. Indian applicants dominate, accounting for 71% of approvals, followed by Chinese applicants at approximately 12%. The H-1B visa aims to attract global high-skill talent to address shortages in the U.S. workforce and is not applicable to low-skill positions.

Source: Bloomberg

Analysis of the New H-1B Policy

Under the new policy introduced by the Trump administration on September 19, 2025, effective from September 21, U.S. employers must pay a one-time fee of $100,000 to apply for an H-1B visa or bring a foreign worker into the country. This policy applies only to new H-1B applications submitted after this date and does not affect existing visa holders or renewals. However, it significantly increases the cost of new applications. The policy is seen as a blow to the tech industry, as approximately 65% of H-1B visa holders work in IT-related roles.

Impact of the New Policy on U.S. Stock Market Investments

Theoretically, this policy could influence the economy through the labor market, subsequently affecting related industries and companies.

From a macroeconomic perspective, the policy’s high fees may restrict the inflow of H-1B workers, potentially increasing job opportunities for U.S. workers, reducing unemployment, and driving wage growth, particularly in the tech and IT sectors. However, rising wages and the $100,000 application fee directly increase business costs, which may lead companies to pass these costs onto consumers through higher prices for products and services, creating a “wage-price spiral.” This could exacerbate inflationary pressures, prompting a more hawkish stance from the Federal Reserve, with broader economic implications that may drag down overall U.S. stock market returns.

From an industry perspective, the tech/IT sector relies heavily on H-1B visas compared to other sectors like manufacturing or retail, which account for only 5-10% of H-1B visas. Since fiscal year 2012, over 60% of approved H-1B workers have been employed in computer-related occupations, directly supporting the tech industry’s core operations. The high fee barrier may force companies to shift toward domestic hiring, offshore outsourcing, or automation. In the short term, this could slow innovation and increase costs, impacting the industry’s overall performance. Additionally, the healthcare and pharmaceutical sectors, which rely on H-1B researchers, may face increased costs or delays in drug development, affecting healthcare stocks (e.g., XLV ETF).

From a company perspective, Indian IT outsourcing firms such as TCS, Infosys, and Wipro, which heavily rely on H-1B visas, face the greatest impact, as the new fees directly threaten their profitability. Major tech companies like Amazon, Microsoft, Meta, Apple, and Google, as well as financial institutions like JPMorgan Chase, are also significant H-1B users, depending on these workers to fill critical roles in cloud computing, artificial intelligence, data science, and engineering. The policy could lead to surging hiring costs, project delays, and compressed profit margins.

Source: Bloomberg

Summary

The U.S. tech stock market has remained stable, indicating that the market has partially priced in the impact of the H-1B policy change. The H-1B visa, a key mechanism for attracting global talent for decades, has significant inertia, and the trend of talent flowing to the U.S. is unlikely to reverse easily, given the country’s leadership in tech, healthcare, and education relies on this talent pool.

The policy’s impact on the U.S. stock market is primarily concentrated in specific industries. Large corporations may absorb the $100,000 fee for top talent in the short term, but small businesses, startups, and non-profits may struggle to afford it. The broader U.S. stock market, driven by macroeconomic factors like interest rates and GDP, remains resilient. If the policy is overturned or adjusted by courts, its impact may weaken further. Investors should monitor policy implementation details and corporate response strategies to avoid overreacting.