Silver Lining: Nvidia has been significantly impacted by the tariffs introduced by Donald Trump on April 2. The company sources nearly all of its GPU products from TSMC and is likely to face price increases in the near future. However, according to market analysts, data center servers for AI workloads could partially avoid the new tariffs.
The technology industry is still grappling with the aftermath of the new economic policy imposed by the US administration on its traditional partners and competitors. Meanwhile, analysts are trying to determine whether some of the most popular tech stocks could show resilience in the face of the resulting financial shock.
According to Stacy Rasgon, senior analyst at Bernstein Research, a majority of Nvidia’s AI data center servers may, in fact, avoid the recently introduced Trump tariffs.
The potential impact of tariffs on Nvidia’s AI data center products has been one of the most frequently asked questions since Trump’s announcement, Rasgon noted. So far, semiconductor products have been exempt from reciprocal tariffs, the analyst explained. However, Nvidia primarily sells “core hardware,” which could fall under the scope of the new tariff measures.
One possible loophole may lie in the United States-Mexico-Canada Agreement (USMCA), the free trade deal signed by Donald Trump and enacted on March 13, 2020. Products manufactured in Mexico that meet USMCA requirements remain exempt from the latest tariffs. Rasgon pointed out that Nvidia builds its AI data center systems in Mexico, which could help shield them from tariff-related price hikes.
Thanks to Nvidia’s own data on export regulation compliance, we can trace where its manufactured parts originate.
According to Rasgon, the majority of Nvidia’s server shipments – including DGX and HGX systems – come from Mexico, with approximately 60 percent manufactured on-site and another 30 percent produced in Taiwan. Given the AI industry’s heavy reliance on Nvidia hardware, it’s safe to assume that a significant majority of AI servers are currently routed through Mexico.
The USMCA indicates that these product categories are compliant with the agreement and should therefore be exempt from the latest tariffs imposed by US authorities. Nvidia and its manufacturing partners are ramping up production in Mexico, meaning the proportion of tariff-exempt products is expected to grow over time.
At the company’s annual GTC conference, Nvidia CEO Jensen Huang stated that the impact of tariffs would not be “meaningful” in the near term. Huang was likely alluding to the expanded Mexico operations, where Foxconn is scaling up manufacturing to better support Nvidia’s growing hardware demands.