Nvidia and AMD to pay 15% of China chip sales revenues to the U.S. government, FT reports

Nvidia and Advanced Micro Devices have reportedly reached an unprecedented agreement with the U.S. government, consenting to cede 15% of revenues from sales of their H20 and MI308 chips, respectively, in China in exchange for export licenses. This arrangement, occurring amid President Trump's broader tariff policies and recent threats of a 100% tariff on semiconductors not built in the U.S., signals the White House's strategic use of exceptions as a bargaining mechanism in critical technology trade.

Analysis

Nvidia (NVDA) and Advanced Micro Devices (AMD) have reportedly entered into an unprecedented arrangement with the U.S. government, securing export licenses for specific chips sold in China by agreeing to cede 15% of the associated revenues. This deal, which applies to Nvidia's H20 and AMD's MI308 chips, provides a conditional pathway to the critical Chinese market amidst a volatile trade environment characterized by President Trump's tariff policies and recent threats of a 100% tariff on non-U.S. built semiconductors. While the 15% revenue share represents a material new cost impacting gross margins on these specific products, the market's moderately positive sentiment (0.35 score) suggests that investors view the resulting regulatory clarity and mitigation of a total market ban as a net positive. This arrangement highlights the White House's strategy of using targeted exceptions as a powerful bargaining tool in high-stakes technology trade negotiations, effectively creating a new form of government royalty on sensitive exports.

Key Decisions for Investors

• Investors should update their financial models for NVDA and AMD to account for a 15% gross revenue reduction on H20 and MI308 chip sales in China, while also upgrading their assessment of geopolitical risk now that a major uncertainty has been resolved.
• Consider this arrangement a new precedent for U.S. policy on critical technology exports; monitor for the potential expansion of such revenue-sharing requirements to other products or companies in the semiconductor and tech sectors.
• Given the clarity provided by the deal, look for formal guidance from company management in upcoming earnings calls to quantify the net impact on revenue forecasts and profit margins.