Will Tariffs Really Hurt Nvidia Stock?

Nvidia stock (NASDAQ:NVDA) tumbled by close to 9% in Monday’s trading, with the broader Nasdaq index sliding by a little over 2%. While the broader market sell-off comes as U.S. President Donald Trump confirmed that his administration will enforce tariffs of 25% on imports from Canada and Mexico starting from Tuesday, Nvidia’s decline was compounded by investigations into Chinese buyers allegedly bypassing U.S. export controls on advanced semiconductor chips. So how do these developments impact Nvidia stock?

Image by Jacek Abramowicz from Pixabay

Tariffs Will Likely Have a Limited Impact

We don’t see the Trump Administration’s initial round of tariffs materially impacting Nvidia. Nvidia’s chips are largely fabricated by TSMC in Taiwan, although the company has some systems and computers that use its chips, which are produced in other regions, including Mexico. It’s possible that these parts of the business could be affected to some extent. However, the core of Nvidia’s business, its high-margin GPU unit, should remain largely unaffected. However, last month, President Trump also hinted at a “25% or higher” tariff on all semiconductor chips the United States imports. This is something investors will need to watch more closely, although we don’t think this will also have a very sharp impact on Nvidia’s bottom line. Nvidia had an adjusted gross margin of about 75.5% as of 2024, meaning that the cost of the products it imports is likely less than a quarter of its revenues. Moreover, Nvidia derives just about 47% of its sales from the U.S., meaning that the margin impact is likely even more limited. Additionally, TSMC, Nvidia’s primary contract manufacturer for its GPUs, has outlined plans to invest around $100 billion into new chip-making facilities in the United States. Nvidia officials have indicated that they would manufacture chips at these new facilities, which might help Nvidia stave off any threats of tariffs in the longer run. However, if you seek upside with less volatility than a single stock, consider the High-Quality portfolio, which has outperformed the S&P 500 and achieved returns greater than 91% since inception.