Nvidia's AI Servers Likely Dodging Latest US Tariffs

Nvidia’s AI server products appear to be shielded from the latest batch of U.S. tariffs thanks to the US-Mexico-Canada Agreement (USMCA), according to insights from Bernstein. This development could alleviate some investor worries about trade policy turbulence. “Among the numerous questions we received last week, a significant one was whether Nvidia’s AI datacenter products would face tariffs,” noted Bernstein analysts.

While semiconductors have largely been spared from retaliatory tariffs, Nvidia’s AI systems, being “primarily hardware,” might have been impacted unless sourced from compliant trade areas.

Examining import classification codes and trade data, it’s evident that most of Nvidia’s US AI server imports probably originate from Mexico. The data suggests around 60% of imports in key server categories will come from Mexico in 2024, with another 30% arriving from Taiwan.

Bernstein analysts utilized Nvidia’s product classification and the U.S. Harmonized Tariff Schedule codes, including 8471.50, 8471.80, and 8473.30, to associate Nvidia’s AI server components like DGX and HGX form factors with these codes. “In our basic interpretation of the USMCA text, these product categories appear to comply with the agreement,” the analysts indicated, referencing specific HTS sections covered by the deal.

This compliance likely renders Nvidia’s AI datacenter exports from Mexico to U.S. hyperscalers eligible for the tariff exemptions highlighted in last week’s announcement. “Servers imported into Mexico from other locations seem to receive similar tariff treatment,” Bernstein remarked.

Despite this positive news, Nvidia (NASDAQ:NVDA) shares have plunged 30% so far this year. Half of the loss occurred just since Tuesday, as the tech sector was broadly hit by what’s been termed the “Trump Tariff Tsunami.” Bernstein noted that the company’s stock is currently trading at around 20 times its projected earnings—its lowest valuation in nearly ten years—although there’s sustained optimism about long-term AI advancement.

“We remain confident in the AI narrative. Once the storm calms, hopefully soon, the stock at current valuations could present a worthwhile opportunity,” the analysts commented, maintaining an “Outperform” rating for Nvidia.