Nvidia, AMD may sell high-end AI chips to China if they pay US a cut

Nvidia and AMD have reportedly agreed to pay the U.S. government 15% of revenue from high-end AI chip sales in China, specifically for Nvidia's H20 and AMD's MI308 chips, in exchange for export licenses. This development signals a notable shift in U.S. export control strategy, transitioning from outright bans to a revenue-sharing model that enables American chipmakers to access the lucrative Chinese market while the government captures economic benefit, balancing national security imperatives with commercial access.

Analysis

A significant shift in U.S. trade policy regarding AI technology is underway, as Nvidia and AMD have reportedly agreed to a revenue-sharing model to regain access to the Chinese market. In exchange for export licenses for their high-end AI chips—specifically Nvidia's H20 and AMD's MI308—the companies will remit 15% of the associated revenue to the U.S. government. This arrangement marks a pivot from outright bans driven by national security concerns to a more economically-focused tariff structure. The context provided by U.S. Commerce Secretary Howard Lutnick suggests this policy change is linked to broader trade discussions with China concerning rare-earth elements, indicating a transactional approach to tech exports. While this development re-opens a lucrative market that Nvidia had specifically designed its H20 chip for, it is not without controversy; national security experts are actively lobbying for a reversal of this decision. For the companies, this deal represents a calculated trade-off: accepting a direct impact on gross margins from Chinese sales in exchange for de-risking market access and resuming a critical revenue stream.

Key Decisions for Investors

• Investors should re-evaluate revenue forecasts for Nvidia and AMD, pricing in renewed access to the Chinese market for high-end AI chips, which could unlock previously blocked sales channels.
• It is crucial to model the direct impact of the 15% revenue share on gross margins for sales of H20 and MI308 chips in China, as this will temper the net profitability of this renewed market access.
• Monitor for geopolitical and regulatory risks, as criticism from national security experts and the policy's linkage to sensitive rare-earth negotiations present potential headwinds that could lead to a reversal of these export licenses.