Memory Stocks Reverse Early Gains, Micron Drops 3% as Trump Administration Plans New Semiconductor Tariffs

TradingKey - The Trump administration is considering a new round of broad semiconductor tariffs, which could expand the taxation scope from chips themselves to chip-containing products such as laptops, gaming consoles, and data center servers. According to people familiar with the matter, the proposal is still in the discussion stage and may be adjusted in the coming weeks to months, with specific tax rates, quotas, and execution details yet to be determined.

The core contradiction of this policy lies in the fact that while the U.S. wants to drive the reshoring of semiconductor manufacturing, it is simultaneously relying on large imports of high-end chips to build AI data centers. If the scope of exemptions tightens, both the cost and uncertainty of AI infrastructure investment could rise.

This is the main reason why, despite Nvidia's (NVDA) earnings report exceeding expectations, memory stocks still opened higher before pulling back.

As of press time, Western Digital (WDC) fell 3.57%, Micron Technology (MU) fell 3%, SanDisk (SNDK) fell 2.48%, and Seagate Technology (STX) fell 1.11%.

Tariff Relief May Be Linked to US Chip Investment

U.S. Commerce Secretary Howard Lutnick is leaning toward linking tariff relief to corporate investments in chip manufacturing in the United States. Under the proposal being discussed, companies could receive duty-free chip import quotas corresponding to the amount of chip capacity they commit to building or expanding in the U.S.; at the same time, the administration is considering establishing a phased implementation transition period for the new tariffs.

Tech companies hope to retain broad exemptions for domestic U.S. uses such as data centers. However, according to people familiar with the matter, recent signals from the administration indicate that existing exemptions for data centers, R&D, startups, consumer applications, civilian industry, and the public sector could all be tightened or eliminated in the future.

The issue, however, is that domestic advanced chip capacity in the U.S. is unlikely to meet demand in the short term. Investments in advanced fabs easily run into billions of dollars, and construction along with yield ramp-up typically takes years. If duty-free quotas are tied to domestic capacity that has yet to reach scale, the gap between actual duty-free import volumes and the tech industry's demand could instead widen.

AI Data Center Construction May Bear Cost Impact First

The US tech industry is concerned that tariffs will directly push up the construction costs of AI data centers. Cloud computing giants are currently ramping up purchases of GPUs, servers, storage, and networking equipment, while high-end semiconductors are already in tight supply. If import costs increase, companies may slow down some data center projects or pass the costs on to the prices of cloud services and AI applications.

Nvidia and AMD (AMD) and other US chip design companies also face uncertainty. Both companies rely on overseas foundry systems to produce high-end chips. Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOGL), and Meta (META), among other hyperscalers, need to continuously procure large volumes of AI chips and servers.

If the scope of tariffs expands, the impact will transmit along the chain from chips and servers to data center construction.

Domestic Capacity Expansion Struggles to Resolve Short-Term Supply Deficit

The U.S. goal of reshoring chip manufacturing has not faced widespread opposition from the tech industry, with disagreement primarily focused on policy pacing. Taiwan's supply chain currently still accounts for over 90% of global capacity for the most advanced semiconductors, making it difficult for U.S. companies to break their reliance on imports in the short term.

TSMC (TSM) has committed $265 billion to its Arizona projects, but even if all relevant projects are fully built, the proportion of its most advanced process capacity located in the U.S. is still expected to be around 30%, and a large amount of new capacity will take several years to be released.

Therefore, whether semiconductor tariffs can truly drive supply chain reshoring depends on tariff rates, exemption scope, duty-free quotas, and transition period arrangements. If import costs are raised significantly before domestic capacity is established, the expansion of U.S. AI data centers and the competitiveness of tech companies could come under pressure first.