On Wednesday, the U.S. administration announced a significant policy action targeting advanced semiconductor supply chains, specifically levying a 25% tariff on selected high-end artificial intelligence (AI) chips manufactured by leading companies Nvidia Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD). This decision follows the completion of a comprehensive nine-month investigation executed under Section 232 of the Trade Expansion Act of 1962, designed to evaluate the national security implications arising from reliance on foreign semiconductor imports.
The investigation focused on select high-performance semiconductors, including Nvidia's H200 AI processor and AMD's MI325X chip, two products recognized for their leading-edge AI computing capabilities. The conclusion reached by authorities identifies a considerable economic and national security vulnerability stemming from the United States' substantial dependency on foreign-sourced chips. Currently, U.S. manufacturers produce only around 10% of the chips the country requires, a supply gap primarily filled by overseas manufacturing hubs such as Taiwan.
In the official proclamation, the administration emphasized that this dependency represents a significant risk to economic stability and national security. The tariffs, therefore, form part of a broader strategy aimed at incentivizing semiconductor manufacturers to establish and expand their production capacity within the United States, thus reducing reliance on external supply chains amid global geopolitical uncertainties.
Alongside the tariff imposition, the administration is engaging with Taiwan to encourage increased investment in its semiconductor sector specifically targeted to U.S. facilities. Efforts include calls for expanded training programs for American workers to support domestic chipmaking capabilities, signaling a multi-faceted approach to nurturing a resilient semiconductor ecosystem.
The White House released a fact sheet underscoring the narrowly tailored scope of the tariffs, asserting that the measures are designed to avoid impairing the wider U.S. AI industry. The tariff exclusions specifically cover chips or devices imported for usage in U.S. data centers, for startups, non-data-center consumer electronics, industry applications, and public sector uses. This limitation aims to maintain functional integrity across critical technology sectors and mitigate potential economic disruptions.
Additionally, Commerce Secretary Howard Lutnick holds broad discretionary authority to grant further exemptions where warranted, affording the administration flexibility in managing tariff application to particular imports or use cases.
This announcement also intersects with an earlier pledge by President Trump, made in December, to impose tariffs on semiconductor imports from China due to concerns about Beijing's aggressive policies to dominate the global chip market. However, those tariffs were postponed until June 2027. Under the current framework, chips produced in Taiwan destined for China must now transit through the United States for third-party testing. Upon entry into U.S. territory, the new tariffs will apply, adding a regulatory layer to the cross-border semiconductor supply chain.
Separately, President Trump has floated the idea of permitting Nvidia to sell certain advanced chips to China while negotiating arrangements for revenue sharing, a proposal that has drawn scrutiny and skepticism from legal experts regarding its feasibility and compliance implications.
In market reactions, shares of Nvidia decreased by 0.21% in after-hours trading, while AMD's stock fell by 0.20%, according to financial news tracking services. According to Benzinga Edge Stock Rankings, Nvidia currently ranks in the 94th percentile for growth potential and the 97th percentile for quality metrics, reflecting strong market performance relative to its peers.