Trump says he's open to letting Nvidia sell a downgraded version of its most advanced chip to China

President Trump has signaled openness to allowing Nvidia to sell a "downgraded" version of its advanced Blackwell AI chips to China, potentially reducing performance by 30-50% and requiring a 15% revenue cut to the U.S. government. This potential policy shift, negotiated with Nvidia CEO Jensen Huang, aims to maintain U.S. market influence in China's AI development and prevent domestic alternatives like Huawei's Ascend series from filling the void as existing chip stockpiles deplete, rather than a complete market exclusion.

Analysis

A potential policy shift signaled by the U.S. President could allow Nvidia (NVDA) to resume selling advanced AI chips to China, albeit in a downgraded form. This development involves a proposed performance reduction of 30-50% for its latest Blackwell system, following discussions with CEO Jensen Huang. This move is contextualized by a pre-existing deal where Nvidia and AMD agreed to a 15% revenue cut on Chinese chip sales in exchange for export licenses. The strategic rationale for this policy change, as articulated by industry analysts, is to maintain China's dependency on U.S. technology and prevent domestic alternatives, such as Huawei's Ascend processors, from dominating the market as China's stockpiles of older Nvidia GPUs deplete. This represents a pivot from a strategy of complete denial to one of controlled market access. However, uncertainty remains regarding the specific capabilities of a downgraded Blackwell chip and its competitiveness against Huawei's next-generation processors, which are expected to be more competitive next year.

Key Decisions for Investors

• This news presents a potential upside catalyst for Nvidia's revenue by reopening a major market, and investors should closely monitor for official policy confirmation and the technical specifications of the proposed downgraded chip.
• Investors must remain aware of the competitive risk from Huawei, as the success of its next-generation Ascend processors, expected next year, could materially impact Nvidia's ability to recapture market share in China.
• The established 15% revenue cut on China sales represents a 'geopolitical tax' that should be factored into valuation models for semiconductor companies, including AMD, that have or seek exposure to the Chinese market.