Amidst President Trump’s recent tariff announcements, tech stock prices have fluctuated, sparking concerns among investors about potential impacts on the tech sector. Shares of NVIDIA, Taiwan Semiconductor Manufacturing Co (TSMC), and AMD have all experienced volatility, partly due to news of a potential 25% tariff on semiconductors shipped to the U.S. These tariffs are seen as part of Trump’s efforts to incentivize more semiconductor and AI-related manufacturing within the U.S. However, industry experts maintain that they are maintaining their long-term strategies and viewing the tariff threats as a minor factor in an already volatile industry.
In response to the looming tariffs, industry players are maneuvering to minimize costs. Companies like Terawulf are expediting deliveries to beat the tariff deadline, while negotiations are underway to determine who will absorb the additional expenses in future deals. Economists warn that the burden of tariffs typically falls on the end consumer, potentially leading to price hikes for products like gaming devices, cars, and smart appliances.
Despite the potential price increases, AI products like ChatGPT may not see a linear impact due to various factors. The ongoing trend of decreasing costs in AI development, coupled with high demand for AI technology, may soften the blow of the tariffs for companies in the ecosystem. Nevertheless, market uncertainties and the unpredictability of trade policies continue to pose challenges for industry players.
Taiwan Semiconductor Manufacturing Co (TSMC), a key player in the chip industry, faces particular scrutiny amid the tariff threats. As a major producer of chips for electronic devices, TSMC’s operations could be significantly impacted by the tariffs, potentially affecting global supply chains and consumer prices. The company and others in the industry are closely monitoring the situation and implementing strategies to navigate the evolving trade landscape.
Several key American AI players, such as NVIDIA, have been at the center of recent discussions regarding semiconductor tariffs. One of President Trump’s primary motivations for imposing these tariffs was to encourage more chipmaking activities to take place within U.S. borders. He expressed his concern over Taiwan’s role in the chip industry, stating that if the business was not brought back to the U.S., there would be dissatisfaction. Both political parties have shown support for reducing America’s heavy reliance on specialized products manufactured in Taiwan, a nation that China appears keen on influencing.
President Biden took a different approach by offering incentives, with the Commerce Department committing up to $6.6 billion to support TSMC’s expansion in Arizona under the CHIPS Act. However, progress on this facility has been hindered by regulatory hurdles and a lack of local expertise.
While most Taiwanese chipmakers downplayed the potential effects of the tariffs, some, like Vanguard, mentioned that the impact would be minimal and had no plans to establish operations in the U.S. Taiwanese officials emphasized the importance of their technological leadership that cannot be easily replaced.
Experts argue that at the forefront of AI development, where Taiwan excels, there isn’t currently an alternative solution. This could pose challenges for American AI companies like NVIDIA and OpenAI, which are driving the country’s advancements in the AI competition with China. The tariffs might increase costs, potentially affecting the competitiveness of these companies.
The global repercussions of the tariffs could lead to companies relocating their manufacturing sites, although this trend was already in motion to enhance supply chain resilience. Some industry leaders believe that diversifying the supply chain’s geographical locations is a necessary step.
In response to the uncertainty surrounding the tariffs, NVIDIA declined to comment, noting the need for further clarity from the U.S. government. The potential impact on AI development and supply chain disruptions remains a topic of concern within the semiconductor industry.
Require companies to adjust. However, at present, numerous companies within the semiconductor supply chain are opting to remain stationary and observe how events unfold. “The market is evolving rapidly, and establishing new factories requires time,” Khan explains. “Therefore, the tariff alone might not be the deciding factor for relocating a facility from Malaysia or Mexico to the US. Some companies may lack the necessary resources, funds, knowledge, or expertise.” For further inquiries, please reach out to us at letters@time.com.
