Nvidia's Israeli Operations Drive Economic Growth, Raise Dependency Concerns
Nvidia, led by founder and CEO Jensen Huang, has become a critical, albeit potentially problematic, engine for Israel's economy. The company's performance, particularly its AI chip sales globally, significantly influences the Israeli economic landscape. Nvidia's networking division, largely based on technology acquired from Mellanox and headquartered in Israel, generated approximately $40 billion in revenue in 2025, accounting for about 16% of Nvidia's total income. In the last quarter, this Israeli-based operation alone surpassed the annual revenue of the local pharmaceutical giant Teva.
Recent data from Israel's Central Bureau of Statistics revealed a 15.4% annualized GDP growth in the second quarter of 2026. However, excluding "exports that did not cross the country's borders", referring to the output of Israeli companies produced abroad, the growth rate was a full percentage point lower. Over 90% of this "foreign production" attributed to Israeli activity stems from Nvidia. This segment's activity reached about 25.4 billion shekels in the first quarter of 2026, representing 5.7% of Israel's total GDP.
Estimates suggest Nvidia's operations have contributed at least $1.5 billion to state tax revenues and boosted government revenue forecasts by approximately 7 billion shekels. Consequently, Huang's decisions regarding expanding development activities, acquiring Israeli companies, or establishing new campuses are no longer just business choices but can dictate Israel's macroeconomic situation, impacting exports, GDP, taxes, and the national budget.
Nvidia's exceptional forecast for the remainder of the year, released in late August, highlighted its networking division, built on the Mellanox acquisition, as its fastest-growing segment. This suggests the significant relationship between Nvidia and Israel is likely to continue intensifying.
