Trump says he asked for 20% cut from Nvidia, calls H20 an 'obsolete' chip

Nvidia and AMD have agreed to pay the U.S. government a 15% cut of their AI chip sales to China in exchange for export licenses, a deal negotiated by Nvidia CEO Jensen Huang with former President Trump. This arrangement permits sales of less advanced chips like Nvidia's H20 and AMD's MI308. However, Trump indicated a much stricter stance on exporting cutting-edge AI technology such as Nvidia's Blackwell, citing national security concerns over China's AI capabilities and suggesting significant performance downgrades or higher fees would be required for any future access to such advanced chips.

Analysis

A new U.S. government policy establishes a framework where Nvidia (NVDA) and AMD (AMD) will pay a 15% fee on specific AI chip sales to China in exchange for export licenses. This deal, negotiated between Nvidia's CEO and President Trump, allows the resumption of sales for lower-performance, China-specific chips like Nvidia's H20 and AMD's MI308. For Nvidia, this reopens a significant revenue opportunity, as the company had previously projected $8 billion in H20 sales for the July quarter before the market was closed off. However, this revenue now comes with a direct 15% margin impact. The policy creates a clear distinction between older and cutting-edge technology; President Trump described the H20 as an "old chip" and signaled that advanced platforms like Blackwell would face much stricter controls, potentially requiring performance downgrades of 30-50% for any future export approval. This development introduces a new, direct cost of doing business in China for these semiconductor firms and establishes a significant regulatory and geopolitical ceiling on their ability to sell their most advanced, highest-margin products into the market, reflecting the negative sentiment signals for both tickers (NVDA: -0.4, AMD: -0.2).

Key Decisions for Investors

• Investors should revise financial models for NVDA and AMD to incorporate a 15% reduction in gross margins for all China-bound AI chip sales permitted under this new policy.
• The explicit restriction on high-end chips like Nvidia's Blackwell caps the long-term growth potential in China, warranting a more conservative outlook on future revenue streams from this region.
• The introduction of a direct government fee tied to export licenses increases the regulatory and geopolitical risk premium for both stocks, as future cash flows from China are now subject to unpredictable policy-driven costs and limitations.
• Monitor for signs of accelerated development from domestic Chinese competitors like Huawei, as continued U.S. export controls on advanced technology could erode the long-term market share of American chipmakers in China.