The Trump administration recently exempted tech products from new tariffs, which gave NVIDIA and other chip companies some temporary relief.

NVIDIA Corporation (NVDA) and other tech giants received welcome news this weekend as the Trump administration granted exemptions from recently announced tariffs for key electronics and semiconductor components.

The move provides temporary relief for technology manufacturers caught in escalating trade tensions, but it may only represent a pause in a broader trade conflict.

The exemptions, published late Friday by US Customs and Border Protection, exclude smartphones, computers, hard drives, processors, memory chips, and flat-screen displays from Trump’s 125% China tariff and the baseline 10% global tariff.

These exclusions will benefit NVIDIA, which has recently seen its stock trade about 24% below its January all-time high. The chipmaker has been at the center of the artificial intelligence boom, but it has also faced pressure from recent market volatility.

The tariff reprieve covers almost $390 billion in US imports based on 2024 trade statistics, including more than $101 billion from China. The exemptions were backdated to April 5.

Image Source: Yahoo! Finance

The AI Powerhouse

NVIDIA has established itself as the dominant force in AI computing. In its fiscal 2025 fourth quarter, 91% of the company’s revenue came from the data center segment, which has experienced explosive growth due to AI demand.

The company’s revenue jumped 78% from $22.1 billion in fiscal 2024 Q4 to $39.3 billion in the most recent quarter. This growth has been fueled by cloud providers upgrading their AI capabilities.

NVIDIA’s ascent has been remarkable. Its fiscal 2025 revenue was 12 times higher than just five years earlier. The company has also maintained impressive profitability, with net income reaching 56% of sales in the fourth quarter.

The chipmaker’s market success stems from its rapid innovation cycle and economic moat. NVIDIA consistently introduces new GPU architectures, with its current Blackwell platform following the successful Hopper and Lovelace generations.

Another competitive advantage comes from NVIDIA’s CUDA software platform. This proprietary development environment works exclusively with NVIDIA hardware, creating significant switching costs for developers who become expert in programming for it.

Trade War Impacts

The tariff exemptions are particularly important for the tech sector, which has been hit hard by market concerns over escalating trade tensions. Before the announcement, “Magnificent Seven” stocks, including NVIDIA, were trading well below their recent peaks.

The move marks the first significant softening in Trump’s trade conflict with China. White House Press Secretary Karoline Leavitt emphasized the administration’s focus on reducing reliance on China for critical technologies while acknowledging the current manufacturing reality.

“President Trump has made it clear America cannot rely on China to manufacturing critical technologies such as semiconductors, chips, smartphones, and laptops,” Leavitt said. “That’s why the president has secured trillions of dollars in US investments from the largest tech companies in the world.”

The exemptions also cover semiconductor manufacturing equipment, crucial for companies building chip factories in the US under the 2022 CHIPS and Science Act. However, analysts caution that this relief may be temporary. The exemptions suggest these products might soon face different, though likely lower, tariffs as part of a targeted approach.

“The US tech industry has a loud voice and despite initial strong pushback against exemptions within the White House, the reality of the situation was finally recognized in the Beltway,” noted Wedbush Securities analyst Daniel Ives. “There is still clear uncertainty and volatility ahead with these China negotiations.”

Buying Opportunity?

For investors eyeing NVIDIA stock, the recent valuation may present an interesting entry point. The stock trades at a forward price-to-earnings ratio of around 25, considerably cheaper than its typical valuation over the past two years.

Despite macroeconomic uncertainties, NVIDIA maintains fundamental strengths. The company faces competition from hyperscalers developing their own AI chips, but its technology lead and software ecosystem provide significant advantages.

NVIDIA’s long-term performance has been nothing short of extraordinary. In just the last five years, its shares have surged 1,610% (as of April 9), creating substantial wealth for patient investors.

The exemption of AI chips and servers from the new tariffs removes one potential headwind for NVIDIA. The company’s GPUs and the servers they power are primarily manufactured in Taiwan and Mexico, both covered by the new exemptions.

The Trump administration is expected to launch a new investigation into semiconductor imports soon, which could lead to targeted sectoral tariffs within weeks or months. Those duties might affect chips and products containing semiconductors, though likely at lower rates than the broad China tariffs.

When asked about the exemptions on Saturday, Trump declined to elaborate but suggested that more details would come on Monday. “I’ll give you that answer on Monday. We’ll be very specific on Monday,” he told reporters.

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