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President Donald Trump's turbulent tariff rollout and subsequent pullback have rattled the stock market and confused economists and business leaders. While some of the most intense tariffs are officially under a 90-day pause, a 10% tariff on most imports is still in effect, as is a hefty 145% import tariff on Chinese goods.
The semiconductor industry has so far avoided the impact of tariffs, which is great news for artificial intelligence leader Nvidia (NASDAQ: NVDA). But what, specifically, do the tariffs mean for Nvidia, and how could they potentially affect the company's growth? Let's take a look.
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The most important piece of information for Nvidia investors in all this tariff turmoil is that semiconductors are exempt. That's fantastic news for Nvidia, considering that its processors are made in Taiwan by Taiwan Semiconductor Manufacturing (TSMC). The Trump administration temporarily slapped a tariff as high as 32% on the country, before reducing it to 10%. Because of the semiconductor exemption, the current tariff percentage doesn't apply to Nvidia's processors made in Taiwan.
In addition to Nvidia using TSMC for manufacturing in Taiwan, Nvidia also makes about 16% of its total revenue from sales in the country, so the semiconductor exclusion is both helping Nvidia's manufacturing costs and its processor sales.
The exemption is also especially important because it means that the trade war between China and the U.S. won't impact Nvidia. The company sells some of its processors to China-based customers -- and the country accounts for about 13% of its sales. So incurring a 145% tariff, or any substantial tariff, would intensely jolt Nvidia's business.
Importantly, President Trump also recently cleared Nvidia to sell its H20 AI chips to China. The processors are less powerful than its Blackwell lineup and thus won't provide China with any advantage in artificial intelligence. Trump was previously considering holding back sales of H20 chips as the U.S. and China vie for AI dominance.
It's worth mentioning that President Trump has threatened to include semiconductors in his tariff plans. Earlier this month, he told a group of reporters that tariffs on semiconductors are coming "very soon."
Fortunately, it seems as if those plans have likely been put on pause for now, along with the rollback of other tariffs.