Analysis
United States trade policy measures introduced around April 2025, including reciprocal tariffs, Section 232 actions, and related national security trade directives, have increased supply chain complexity and operational costs for NVIDIA without resulting in broad tariff liabilities across its primary product lines1. Blanket reciprocal tariffs were tempered by electronics and technology hardware exclusions, while advanced computing systems largely sidestepped direct border duties under general import categories. However, NVIDIA explicitly incorporates tariffs into its cost of revenue disclosures alongside semiconductor fabrication, packaging, memory, and logistics2. Management regularly notes that evolving global trade policies have added cost and friction throughout the company's manufacturing and distribution footprint3.
NVIDIA's most direct and quantified tariff exposure involves its H200 integrated circuits destined for China under special licensing programs4. Beginning in February 2026, the United States government granted licenses permitting the shipment of limited volumes of H200 products to designated customers in China5. As a mandatory condition of these export licenses, H200 chips must pass through a specialized inspection process inside the United States before delivery to overseas customers2. This physical routing requirement triggers a 25% U.S. customs tariff upon importation into the country2. NVIDIA disclosed that it has been unable to pass this 25% tariff along to customers and does not expect to pass along any tariff costs on future licensed sales2.
Despite the 25% tariff rate on H200 shipments, the financial impact on NVIDIA's consolidated results has been modest because Chinese authorities restricted incoming volumes2. During the second quarter of fiscal 2027, shipments executed under the H200 licensing program accounted for less than 1% of Data Center revenue2, which totalled $89.02B for the quarter2. NVIDIA has not reported consolidated company-wide dollar figures for net tariff expense or gross margin basis point headwinds. The company has distinguished between tariff duties and export control actions: while NVIDIA took a $4.5B inventory and purchase obligation charge in the first quarter of fiscal 2026 following sudden H20 export bans6 and a $0.4B charge in the first half of fiscal 2027 on diminished H200 demand2, these write-downs reflected export restrictions rather than tariff payments. Separately, in the first quarter of fiscal 2026, management cited temporary tariff-related uncertainty that weighed on Professional Visualization workstation systems, though sequential revenue growth resumed immediately the following quarter7.
NVIDIA mitigates global tariff risk primarily through geographic supply chain diversification and domestic onshoring8. Chief Executive Officer Jensen Huang confirmed that the company has prepared for trade barriers by expanding onshore manufacturing partnerships, including utilizing Taiwan Semiconductor Manufacturing Company's $100B fab complex in Arizona, where NVIDIA runs production silicon8. The company is also increasing U.S.-based manufacturing investments in specialized assembly equipment and processes to ensure domestic supply redundancy2,4. On the commercial side, NVIDIA's pricing generally does not fluctuate with short-term cost changes, and the company manages supplier cost structures through long-term capacity agreements that reached $279B as of July 20262.
Disclosed Tariff Figures
Sources
Second, tariffs. We're preparing, and we have been preparing to manufacture onshore. TSMC's investment in $100bn of fabs here in Arizona, the fab that they already have, we're in it. We are now running production silicon in Arizona. We will manufacture onshore. The rest of the systems, we'll manufacture as much onshore as we need to. I think the ability to manufacture onshore is not a concern of mine.
The licenses require that the H200s go through an inspection process in the United States prior to any shipment to the customer. As a result, any H200s shipped under the new licensing program are subject to a 25% tariff upon importation into the United States. We have been unable to pass along any of the tariff to our customers, and do not anticipate doing so in the event we are able to sell licensed products into the China market.
Tariff-related uncertainty temporarily impacted Q1 systems, and demand for our AI workstations is strong, and we expect sequential revenue growth to resume in Q2.