Investing.com - The impact on artificial intelligence chips costs from new Chinese tariffs on goods imported from the U.S. is likely to be limited, according to analysts at Bernstein.
In a note to clients, the analysts added that such levies on imported processors will "not pose a sizeable impact" to expenses related to AI computing, which rely heavily on these chips to train AI models.
AI-optimized chips from semiconductor giant Nvidia (NASDAQ: NVDA ), in particular, face a "minimal" effect from the tariffs because these are produced in non-U.S. foundries and shipped directly to China, the analysts flagged.
In total, semiconductors accounted for only 7% of total items sent to China from the U.S. in 2024, equating to roughly $10 billion, Bernstein said, citing U.S. government data.
"While demand impacts are largely uncertain at this point, we expect AI demand to stay strong as DeepSeek cost improvements have driven application development such that companies are seeing AI development as critical for growth and for competition," the analysts led by Boris Van wrote. DeepSeek is a Chinese start-up whose AI model has shown the ability to deliver performance rivalling that of OpenAI’s ChatGPT at a fractions of a cost.
"We also expect the development for the AI [and] chip ecosystem to be a key push from the government to offset tariff impacts," the analysts said.
However, they predicted that a tariff-related slide in broader demand could have a "more material" effect on non-AI workloads and IT infrastructure spending.
"Traditional spend on [Enterprise Resource Planning] upgrade, cybersecuritiy, [and] other migrations could be delayed if macro turns and [does] not get sufficient policy support," the analysts said. "[T]hese impacts could trump any AI revenue story at the software covered names."
The Bernstein analysts had a "market-perform" rating for Chinese groups Baidu (NASDAQ: BIDU ) and Yonyou, as well as an "outperform" rating for Kingsoft Office and Kingdee.
Earlier this month, U.S. President Donald Trump unveiled steep new tariffs on China that raised U.S. duties on imports from the country by 34%.
On Monday, Trump threatened to further raise the levies on Chinese imports by 50%, unless Beijing retracts its own 34% tariff hike on U.S. goods. China has vowed to "fight to the end" if Trump moves ahead with his additional levies, in a sign of escalating trade tensions between the world’s two largest economies.
Trump later said that while he would talk with China about the moves, he was not considering a pause on the tariffs to allow for negotiations.