Chip giants Nvidia and AMD to pay 15% of China revenue to US

Nvidia and AMD have agreed to remit 15% of their China-derived H20 and MI308 chip revenues, respectively, to the U.S. government as a condition for securing export licenses and resuming sales in the market. This development, which reverses prior U.S. bans on these chips, signifies a notable easing of U.S.-China trade tensions and follows other recent reciprocal trade relaxations.

Analysis

Nvidia and AMD have reached a pivotal agreement with the US government, enabling them to resume semiconductor sales to China by remitting 15% of the revenue from these specific transactions. This arrangement, which applies to Nvidia's H20 and AMD's MI308 chips, reverses prior US bans and provides a clearer, albeit more costly, path to accessing the critical Chinese market. The 15% revenue share represents a material new cost of sales that will directly impact gross margins on these product lines. However, the deal signifies a notable de-escalation in US-China tech-related trade tensions, occurring alongside other positive signals such as relaxed controls on rare earth exports from Beijing and lifted US restrictions on chip design software. While this development reduces uncertainty for both chipmakers, the broader trade relationship remains fluid, with an agreement to extend a 90-day tariff truce still unconfirmed ahead of an August 12 deadline.

Key Decisions for Investors

• The reopening of the Chinese market is a significant positive catalyst for both Nvidia and AMD, but financial models must be adjusted to account for the 15% revenue share, which will directly compress gross margins on H20 and MI308 chip sales.
• This agreement provides a degree of regulatory clarity that has been absent, potentially justifying a re-evaluation of the geopolitical risk premium previously applied to both stocks.
• Investors should remain vigilant regarding broader US-China trade negotiations, particularly the upcoming August 12 tariff truce deadline, as a failure to extend the pause could overshadow the benefits of this specific chip export deal.