The artificial-intelligence boom has lifted chip stocks this year and made Nvidia the most valuable listed company in the world. But the future looks increasingly murky because of a factor that investors seem to be blithely ignoring: tariffs.

President Trump threatened to hit chip imports with tariffs after he took office early this year and soon initiated a trade investigation into the sector alongside pharmaceuticals, copper and lumber. Those investigations will likely result in tariffs: Trump has already promised a 50% levy on copper and suggested recently that pharma and chips were next.

Investors have largely shrugged. Chip stocks -- as measured by the PHLX Semiconductor Sector Index -- fell after Trump took office in January but have since moved up. The index has risen 43% since the trade investigation was revealed in April and isn't far from a record high. The collective price/forward-earnings ratio of stocks in the index has climbed from around 24 to 30 in that time.

Investors are drawing some comfort from the fact that chip and pharma industries may get time to adjust to the tariffs and bring some production home. Trump has floated a grace period of a year or so for pharmaceuticals. That might be sufficient for big companies in that industry to reroute supply chains, especially since many have all along retained some manufacturing capacity in the U.S.

For chips, though, things are more complex. For one thing, they are often shuttled between several countries at different stages of production. Even a chip made in Arizona could be sent to China or Malaysia to be tested and packaged into its final form, at which point it might be inserted into an iPhone that is exported back to the U.S.

Meanwhile, there is no simple path to bring chip-making back to the U.S. in great scale, even if the incentives are there.

The world's largest chip makers, including Taiwan Semiconductor Manufacturing Co., Intel and Samsung Electronics, have grown their U.S. manufacturing in recent years, partly as a result of government grants and tax incentives under 2022's Chips Act.

But it takes years to build new chip factories, the most advanced of which cost tens of billions of dollars each, and most of the industry's manufacturing currently takes place in Asia. Even with the recent growth of U.S. chip-making, only 14% of the world's chips are expected to be made in the U.S. by 2032, compared with about 10% as of 2022, according to an industry-association report last year. There is thus no easy fix when tariffs come in, even if they are delayed.

And tariffs could easily sting. The Trump administration is unlikely to stop at a blanket charge on raw chip imports because their value -- around $45 billion last year, per a Bernstein Research analysis -- is relatively small. Such direct chip imports represent only a fraction of global chip sales that totaled $630.5 billion last year, according to the World Semiconductor Trade Statistics organization.

The administration will therefore likely also go after non-U.S. chips inside electronics and other products. That is a much bigger bill: About $114 billion of mobile phones alone were imported last year, and Bernstein estimates about 60% of their value came from chips inside them.

Nvidia CEO Jensen Huang speaking at a White House event, with President Trump in the background.

TD Cowen analyst Paul Gallant said in a recent note that he expected a 25% tariff on chips inside electronics, mirroring how Trump has structured levies on steel, aluminum and auto parts. Another 10% tariff would likely come on the total value of electronics like laptops and phones, he said. Such an outcome would inevitably raise prices and could damp demand.

Another headwind could come from country-specific tariffs. Some critical chip-making equipment, including advanced machinery from ASML in the Netherlands, could be subject to significant new levies: Trump has threatened a 30% tariff on the European Union in recent days. There is no U.S.-based alternative to those machines, nor will there be in the foreseeable future. That in turn would make it all the more expensive to move chip production back to the U.S.

Tariff uncertainty is already causing ASML's customers to be "a bit more careful" about placing orders for new machines that can cost hundreds of millions of dollars each, Chief Executive Christophe Fouquet told analysts Wednesday as the company backed off a revenue-growth forecast for next year.

Then there are the challenges to downstream sectors from autos to appliances, where higher prices and supply-chain shifts could cause disruption, as the pandemic-era shortages clearly illustrated. Investors awed by AI hype shouldn't be blinded to the real risks facing this vital component of the modern economy.