Nvidia’s gifts are distorting Israel’s economic data - Ynetnews

Israel's recent economic data has shown strong growth, but analysis suggests this is largely driven by the activities of NVIDIA and its Israeli subsidiary, Mellanox. Although NVIDIA does not manufactu... Read original →

By routing global AI chip value-added activities through Mellanox’s Israeli entity—despite zero local wafer production—NVIDIA inflates Israel’s GDP and export figures via IP and R&D accounting structures tied to 3nm/EUV innovation. This distorts macro signals, masking weak domestic manufacturing recovery. Technically, Israeli EDA, HPC software, and advanced packaging benefit short-term, yet lack foundry integration for a self-sustaining semiconductor loop. Under OECD’s Pillar Two and BEPS 2.0, such profit-shifting faces rising compliance costs and retroactive tax exposure. Competitors like AMD and Intel are accelerating alternative AI ecosystems in Europe and Taiwan, China to reduce reliance on NVIDIA-centric nodes. Over the next 12–24 months, any AI investment slowdown or geopolitical friction could trigger a Nokia-style fiscal reckoning, demanding urgent diversification of Israel’s high-tech export base.