Nvidia's Israeli AI Unit Fuels Billions in State Revenue

Six years after Nvidia acquired Israeli company Mellanox for $6.9 billion, the acquisition has become a cornerstone of Israel's economy, driven by the artificial intelligence revolution. What began as a purchase of data center communication technology by the American giant has evolved into a strategic arm crucial to Nvidia's meteoric rise.

Nvidia's networking division revenue has surged dramatically, from approximately $8.5 billion two years ago to over $31 billion in the fiscal year ending early 2026. Current revenue rates suggest a further doubling, with the first half of the current year already surpassing $32 billion. It is estimated that about 70% of this business relies on developments from the Israeli team originating from Mellanox.

The economic impact on Israel is substantial. The Israeli contribution to Nvidia's revenue was estimated at $20 billion last year and is projected to exceed $40 billion this year. While physical production occurs overseas, the financial impact is deeply felt within national budget figures, with a significant increase in the Central Bureau of Statistics category for "goods sold abroad," indicating a massive capital inflow that necessitates a reevaluation of how Israel measures its exports.

Tax authorities are also seeing a significant boost. Nvidia's 2026 financial reports show a phenomenal corporate tax payment of about $1.28 billion to the state, a figure expected to double this year due to exploding sales. With thousands of engineers, researchers, and developers working in local development centers, Israel's economic fate is now closely tied to Nvidia's success in the AI sector.