- One key component seems to have escaped Trump's new tariffs
- But other countries could hit back
- It all seems like bad news for continued cloud and AI deployments in the U.S., analysts said
Update 4/3/2025: The New York Times reported Thursday evening that President Trump said aboard Air Force One that tariffs on semiconductors will be implemented "very soon." The tariff situation continues to evolve rapidly. Our original story follows.
Buried in the fine print of President Donald Trump’s new tariff announcement is a single little detail that must have brought Nvidia, AMD and the like to tears. Semiconductors, it seems, are exempt from the reciprocal tariffs being levied on U.S. trade partners – at least for now.
While that’s wildly good news considering the astronomical cost of the GPUs that are fueling the U.S. AI boom, it’s important to note that there’s a lot more that goes into a server than just chips. That can only mean one thing.
“The cost of servers, near term, is likely to increase materially, which may have an impact on AI deployments,” many of which are in the U.S., New Street Research’s Pierre Ferragu wrote in a note to investors on Thursday.
Ferragu added that even with the exemption, there are still plenty of questions around how the tariffs will play out in the market.
“How would tariffs apply to a GPU server, selling for $400k, of which $280k is the price of GPUs alone?” he asked. “Will the buyer be allowed to pay for chips directly to their (mostly U.S.) manufacturers, and pay tariffs only on the cost of the server excluding silicon (assembly and other parts)?”
Tit-for-tat semiconductor tariffs
Jack Gold, founder of J. Gold Associates, pointed out it’s not even clear that semiconductors will remain exempt. Afterall, he said, Trump has been pitching chip tariffs for a while now.
Then there’s the flip side of the tariff coin. Given many leading edge chips come from U.S. companies but are made overseas, they present the perfect opportunity for other countries to hit back against the U.S. That means the cost of chips from Nvidia and other semiconductor companies could suddenly skyrocket and make large-scale deployments in data centers much more expensive than originally anticipated.
How likely is this scenario? Welllll …
“I can’t see how other countries don’t retaliate with tariffs on these chips,” Gold said.
“China will be the winner in any chip trade war. They’re moving fast to catch up and they aren’t pushing any penalties like tariffs.”
Tariffs could trigger an AI pullback
Both Ferragu and Gold also warned that the tariffs could trigger an unexpected slump in demand – both for chips and the cloud and AI solutions they power.
Enterprises could pull back on AI and cloud investments as costs rise in a strategic move to hoard cash in case they need it to keep the ship afloat, Gold said.
“Uncertainty is always a bad thing when new investments are required,” he said. “If your stock price tanks, you’re not likely to spend excessively on new tech.”
More than just chip tariffs
The tariffs won’t just shake the ground in the semiconductor market. Gold noted it could also push companies in other countries to steer clear of U.S. AI tech in general.
“There is also an effect on which models they will use. If you’re in France, you’ll go with local Mistral and not deploy OpenAI, for example,” he said.
Maybe it’s just us, but that’s not great news for a country that's aiming for AI leadership.