Nvidia and AMD strike major revenue-sharing deal with US government over China chip sales

Nvidia and AMD have reportedly agreed to an unusual 15% revenue-sharing deal with the U.S. government on AI chip sales to China, including Nvidia's H20, following a meeting between Nvidia's CEO and President Trump. This arrangement, which Nvidia has not directly confirmed but stated compliance with, aims to resume previously halted exports to a critical market, with China representing 13% of Nvidia's and 24% of AMD's total revenue. Analysts project this could generate hundreds of millions quarterly for the U.S. government, while establishing a precedent that blurs national security policy with economic strategy for tech exports.

Analysis

Nvidia and AMD have reportedly entered into a highly unconventional agreement with the U.S. government, consenting to a 15% revenue-sharing arrangement on AI chip sales to China in exchange for the resumption of export licenses. This development, which follows a meeting between Nvidia's CEO and President Trump, directly impacts a significant revenue source for both firms; China accounted for $17 billion (13%) of Nvidia's last fiscal year revenue and $6.2 billion (24%) of AMD's 2024 revenue. While this deal reopens a critical market previously closed by national security concerns, it introduces a direct tax on sales, which will compress margins on products like Nvidia's H20 chip. The moderately negative sentiment score of -0.4 for both companies reflects market apprehension, suggesting that the cost of compliance and the precedent of direct government revenue participation are viewed as significant headwinds. The arrangement blurs the lines between national security policy and economic strategy, creating a new layer of regulatory uncertainty for U.S. technology companies with substantial foreign market exposure.

Key Decisions for Investors

• Investors should revise their earnings models for Nvidia and AMD to account for a 15% reduction in gross revenue from China sales, directly impacting margin assumptions and profitability forecasts.
• Monitor for any signs of this revenue-sharing model being applied to other technology sectors, as it establishes a new precedent for regulatory risk and government intervention in foreign sales.
• Despite the reopening of the Chinese market, the negative sentiment and uncertainty surrounding the deal's implementation warrant caution; weigh the potential for renewed revenue against the margin compression and heightened geopolitical risk before increasing positions.