Nvidia AI servers coming from Mexico could be partially exempt from Trump's tariffs

[Alfonso Maruccia]

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.

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Nvidia AI servers coming from Mexico could be partially exempt from Trump's tariffs

 

[NumberNine]

Won't someone please consider the livelihood of poor the little defenseless, price hiking, pandemic predator Nvidia?

 

[Dimitriid]

Mexican here, couple things:

1) We're currently still facing never before seen record droughts on many places around the country where sites would be even feasible to being with and sites where that isn't the case, well they're tropical/jungle climates so not really suitable sites for massive manufacturing facilities without so much impact to the environment they would quickly become unsuitable anyway and cause droughts there too.

Not that literally causing people to die of thirst would be a concern as the US Started illegal intervention and encouraged coups and death squads for much less (Google Chiquita Banana or United Fruit Company - Guatemala if you want to read on it for yourselves)

2) Even if the first point wasn't an issue, we're also facing electric grid infrastructure problems: the grid is already operating close to capacity during record, nonseasonal heatwaves (Not surprising we have these too, rapidly contributing to drought conditions) And it's not like you can just manifest massive infrastructure projects into reality over night.

There was already some announced grid infrastructure solutions but they were centered around renewable sources as the focus to rapidly replace not just aging and barely sufficient grid with more capacity but start moving towards renewables a lot more.

I guess all that is now out of the question and we can expect life and food-chain threatening droughts and rolling blackouts because American Id!ots require their daily dosage of giblified AI cartoons.

So my conclusion is (!@#( off to Alaska instead, at least you bought that from the equally despised Russia a while back.

 

[Watzupken]

With the retaliation tariffs from China, it’s going to have a major impact to Nvidia’s bottom line. Chinese companies now will not just have to pay more to circumvent location restrictions and with the added tariffs, it will cost more than 2x what it used to cost to buy Nvidia AI chips.