Trump's AI chip deal with China a growth catalyst for US tech, says Wedbush's Ives

Wedbush analyst Dan Ives identifies the Trump administration's agreement allowing Nvidia and AMD to sell AI chips in China via export licenses, in exchange for 15% of profits, as a significant growth catalyst for these companies and the broader US Big Tech sector over the next 12-18 months. This deal removes a key growth barrier, preventing a potential "self-inflicted wound" for US tech by preserving its global AI leadership against rising Chinese competitors like Huawei, while also balancing national security considerations. Ives considers the 15% profit share a minimal cost for crucial market access in the ongoing "4th Industrial Revolution."

Analysis

A recent Trump administration agreement, which allows Nvidia and AMD to resume selling AI chips to China under export licenses in exchange for 15% of profits, is viewed by Wedbush analyst Dan Ives as a major growth catalyst for the US semiconductor and broader technology sectors over the next 12 to 18 months. This policy pivot removes a significant growth barrier imposed by prior restrictions, which risked ceding a potential $15 billion annual advantage to Chinese competitor Huawei. The deal is characterized as a strategic balance between national security and commercial interests, ensuring US firms like Nvidia, Microsoft, Alphabet, Meta, Amazon, and Palantir maintain their lead in the global AI market. According to Ives, the 15% fee is a modest cost for regaining access to the critical Chinese market, which remains bottlenecked by the supply of high-end US chips, thereby fueling what he terms the “4th Industrial Revolution.”

Key Decisions for Investors

• Investors should reassess their models for Nvidia and AMD to account for renewed access to the Chinese market, which represents a significant revenue catalyst, while factoring in the 15% profit-sharing fee's impact on net margins.
• Consider the positive cascading effect on the broader US AI ecosystem, including major cloud and software players like Microsoft, Alphabet, Amazon, and Meta, as enhanced chip distribution could accelerate AI infrastructure development globally.
• It is crucial to monitor the geopolitical stability of this 'highly unusual' agreement, as any political shifts or heightened US-China tensions could abruptly reverse this policy, reintroducing significant revenue risk for the chipmakers.
• Evaluate US tech's competitive positioning against Chinese counterparts like Huawei, Alibaba, and Baidu, as this deal, while providing access, may also accelerate China's AI capabilities, altering the long-term competitive landscape.