When a single company can shift a nation’s GDP forecast by more than a percentage point, it’s worth paying attention. Israel’s Finance Ministry has revised its economic growth projections upward for 2025, and the person most responsible for that revision doesn’t work in Jerusalem. He works in Santa Clara.
Finance Ministry Chief Economist Shmuel Abramzon confirmed in an interview that revenues tied to Nvidia’s Israeli operations are a primary driver of the upgraded outlook. Without Nvidia’s contribution, Israel’s GDP growth for 2025 would have landed around 1.6%. With it, the projection sits at 2.9%.
The Mellanox effect
Nvidia’s Israeli footprint runs through Mellanox, the networking and connectivity company it acquired for $6.9 billion in 2020.
Mellanox’s technology sits at the heart of AI data-center infrastructure, connecting the GPUs that train large language models and run inference workloads at scale.
Nvidia’s networking division, developed largely out of Israel, is projected to contribute around $20 billion in revenue for calendar 2025, with estimates pointing toward more than $40 billion in 2026. The relevant segment was already generating roughly $15 billion in quarterly revenue. Nvidia’s global division posted $32.3 billion in revenue in the first half of fiscal 2027.
The Israeli operations now employ around 6,000 people, with plans to grow that number further. Israel’s high-tech sector already accounts for approximately 18% of the country’s GDP and is responsible for roughly half of recent economic growth.
Good news with an asterisk
The tax math alone is striking. Nvidia paid approximately $1.28 billion in Israeli taxes in the last fiscal year, a windfall that helped explain the Finance Ministry’s unexpectedly strong revenue collections.
Macroeconomists have raised concerns that this dynamic can overstate Israel’s underlying economic momentum. A meaningful portion of the revenue attributed to Nvidia’s Israeli R&D hub involves intellectual property and software exports, which don’t always correspond to physical goods crossing a border.
Israel’s government is aware of the dependency it has developed. Officials have signaled efforts to widen the country’s AI ecosystem beyond Nvidia’s orbit, encouraging other high-tech firms to scale their Israeli operations.
What this means for the broader AI trade
Nvidia’s networking revenue trajectory, from $20 billion projected in 2025 to over $40 billion in 2026, suggests the AI data-center buildout is nowhere near a plateau.
Nvidia’s dependence on Israeli engineering talent for a critical product line creates its own set of risks. Geopolitical instability in the region, which has intensified since late 2023, is a variable that investors in Nvidia’s long-term networking growth story cannot ignore.