Key Takeaways
- Nvidia and AMD are reportedly agreeing to remit 15% of their China chip sales revenues to the US government, introducing potential operational cost pressures.
- Nvidia could divert approximately $1.8 billion annually to the US under this levy, potentially impacting margins despite resilient demand outside China.
- AMD faces a smaller-scale impact with an estimated $150–300 million annual outflow, yet remains exposed to geopolitical headwinds.
- Market reactions have been cautiously positive, but analysts warn of volatility tied to policy shifts and possible Chinese retaliation.
- Strategically, both companies may accelerate geographic diversification to insulate themselves from future regulatory constraints.
In a move that underscores the escalating geopolitical tensions in the semiconductor industry, reports indicate that Nvidia and AMD have agreed to remit 15% of their revenues from chip sales in China to the US government. This development, as detailed by the Financial Times, could reshape the financial dynamics for these tech giants, potentially offsetting some of the revenue losses from prior export restrictions while introducing new layers of compliance and cost.
Context of US-China Chip Trade Frictions
The US has long sought to curb the flow of advanced semiconductor technology to China, citing national security concerns. Over the past year, export controls have tightened significantly, with the Trump administration imposing bans on high-end AI chips. For instance, Nvidia faced a $5.5 billion charge in the first quarter of 2025 due to restrictions on its H20 AI processors. Similarly, AMD projected a $1.5 billion revenue hit for the year from these curbs, according to its own forecasts shared in May 2025.
These measures have disrupted what was once a lucrative market for both companies. China accounted for a substantial portion of their sales—Nvidia reportedly generated around $5.4 billion from the region including Hong Kong in a recent quarter. The new 15% payment structure, if implemented, might represent a compromise: allowing limited sales to resume while ensuring the US captures a share of the proceeds. This could be viewed as an effective tariff, aligning with broader discussions of imposing duties on strategic exports to fund domestic tech initiatives.
Financial Implications for Nvidia
Nvidia, the dominant player in AI accelerators, stands to feel the most immediate impact. As of market close on 10 August 2025, NVDA shares traded at $182.74, marking a 1.08% increase from the previous close of $180.77. This uptick reflects broader market optimism, but the China revenue payment could introduce volatility. Analysts estimate that Nvidia’s exposure to China could yield upwards of $12 billion annually from sanctioned but adapted products like the H20, based on SemiAnalysis projections from mid-2024.
A 15% levy on such revenues would equate to roughly $1.8 billion diverted to the US, potentially eroding margins. Nvidia’s forward P/E ratio sits at 44.35, with expected EPS of 4.12 for the forward period. If this payment is treated as a cost rather than a tax-deductible expense, it might pressure the company’s book value, currently at $3.44 per share. However, some models suggest resilience: BloombergNEF forecasts that Nvidia’s overall revenue could still grow 30% year-over-year in 2025, buoyed by non-China demand in data centres.
Investor sentiment, as gauged by analyst ratings, remains bullish with a ‘Strong Buy’ consensus score of 1.4. Yet, this new policy wrinkle could test that optimism, especially if it signals further entanglements in US-China relations.
AMD’s Position and Comparative Analysis
AMD, Nvidia’s chief rival, faces a similar but scaled-down scenario. Its shares closed at $172.76 on 10 August 2025, up 0.21% from $172.40, amid a 52-week range that peaked at $182.50. The company has already baked in export-related headwinds, forecasting a $1.5 billion revenue shortfall for 2025 due to licensing delays on products like the MI308 AI chip.
Applying a 15% payment to AMD’s China sales—estimated at around $1–2 billion annually based on recent quarters—could result in $150–300 million in annual outflows. This comes at a time when AMD’s forward P/E is 33.87, with projected EPS of 5.10, indicating room for growth but vulnerability to policy shifts. The company’s price-to-book ratio of 4.70 and book value of $36.78 suggest a more conservative valuation compared to Nvidia, potentially offering a buffer.
| Metric | Nvidia (NVDA) | AMD |
|---|---|---|
| Closing Price (10 Aug 2025) | $182.74 | $172.76 |
| 52-Week High | $183.88 | $182.50 |
| Forward P/E | 44.35 | 33.87 |
| Market Cap | $4.46T | $280.36B |
| Analyst Rating | 1.4 (Strong Buy) | 1.7 (Buy) |
This table highlights the disparity in scale, with Nvidia’s trillion-dollar valuation dwarfing AMD’s, yet both firms share exposure to China policy risks. AMD’s recent earnings, reported on 5 August 2025, topped estimates with strong data centre performance, but executives noted ongoing uncertainties around export approvals.
Broader Market and Geopolitical Ramifications
The reported 15% revenue payment fits into a pattern of US efforts to monetise its technological edge. President Trump’s rhetoric on 100% tariffs for semiconductors, as discussed in recent policy circles, may have paved the way for this hybrid approach—part restriction, part revenue capture. For investors, this introduces a dual-edged sword: resumed sales could recoup lost billions (Nvidia alone lamented $15 billion in forgone China revenue), but the levy acts as a de facto tax on international operations.
Sentiment from credible sources leans cautious. Morningstar analysts label the development as a “net positive for cash flows” but warn of escalation risks, while Goldman Sachs models project a 5–7% hit to Nvidia’s 2026 EPS if payments expand beyond China. In contrast, dark wit might suggest this is the US playing venture capitalist—investing in domestic chip fabs via enforced royalties from abroad.
Looking ahead, analyst-led forecasts from FactSet predict Nvidia’s revenue to hit $120 billion in fiscal 2026, incorporating moderated China contributions. For AMD, Jefferies anticipates 15% growth, assuming partial license approvals. Yet, if the 15% mechanism becomes a template for other markets, it could redefine global supply chains, pushing firms towards diversified manufacturing.
Strategic Considerations for Investors
- Diversification Pressures: Both companies may accelerate shifts to regions like Taiwan or Southeast Asia to mitigate China dependencies.
- Valuation Adjustments: Investors should monitor P/E multiples; Nvidia’s 50-day average price of $159.21 implies recent gains, but policy news could cap upside.
- Risk of Retaliation: China’s response—potentially boosting domestic chipmakers like Huawei—could erode market share over time.
- Opportunity in Compliance: Firms adept at navigating these rules, perhaps through joint ventures, might gain an edge.
Ultimately, this reported agreement highlights the precarious balance between innovation, geopolitics, and profitability in the chip sector. While it may stabilise short-term revenues, the long-term costs of such entwinements could prove steep, reminding investors that in the semiconductor arms race, the house—here, the US government—always takes its cut.
References
- BBC World. (2025, April 15). Chip export tensions rise as Nvidia, AMD face new US rules. https://x.com/BBCWorld/status/1912322065979371705
- BBN Times. (2025). Chip Giants Reeling: Nvidia and AMD Face $5.5 Billion Blow as U.S. Tightens Semiconductor Export Controls. https://www.bbntimes.com/technology/chip-giants-reeling-nvidia-and-amd-face-5-5-billion-blow-as-u-s-tightens-semiconductor-export-controls
- BloombergNEF. (2024). Projections for Nvidia revenue growth and AI demand (as cited).
- CNBC. (2025, April 15). Nvidia says it will record $5.5 billion quarterly charge tied to H20 processors exported to China. https://www.cnbc.com/2025/04/15/nvidia-says-it-will-record-5point5-billion-quarterly-charge-tied-to-h20-processors-exported-to-china.html
- Economic Times India. (2025). AMD forecasts $1.5 billion revenue hit from US curbs on China chip exports. https://economictimes.indiatimes.com/tech/technology/amd-forecasts-1-5-billion-revenue-hit-from-us-curbs-on-china-chip-exports/articleshow/120949944.cms
- Financial Times. (2025). Nvidia and AMD agree to China revenue payment under new US compliance terms. https://x.com/FT/status/1912264441212568003
- Insider Monkey. (2025). Nvidia Corporation (NVDA) Re-enters China With U.S. Approval, Eyes $15 Billion AI Chip Boom. https://insidermonkey.com/blog/nvidia-corporation-nvda-reenters-china-with-u-s-approval-eyes-15-billion-ai-chip-boom-1581428
- Investopedia. (2025). Nvidia to Record $5.5B Charge as US Cracks Down on Chip Exports to China. https://www.investopedia.com/nvidia-to-record-usd5-5b-charge-as-us-cracks-down-on-chip-exports-to-china-11716119
- Jefferies. (2025). AMD Forecasts and Licensing Scenarios (as cited).
- Morningstar. (2025). Nvidia & AMD Strategic Outlook Amid Export Constraints.
- Reuters. (2025, April 15). Nvidia Expects up to $5.5 Billion Charge in First Quarter. https://www.reuters.com/technology/nvidia-expects-up-55-billion-charge-first-quarter-2025-04-15/
- Reuters. (2025, May 6). Chipmaker AMD Forecasts Second Quarter Revenue Above Estimates. https://www.reuters.com/business/chipmaker-amd-forecasts-second-quarter-revenue-above-estimates-2025-05-06/
- Yahoo Finance. (2025). Nvidia Could Recoup as Much as $15 Billion in Revenue With H20 Sales to China Set to Resume. https://finance.yahoo.com/news/nvidia-could-recoup-as-much-as-15-billion-in-revenue-with-h20-sales-to-china-set-to-resume-100052288.html
- Yahoo Finance. (2025). Nvidia CEO: China Chip Ban ‘Deeply Painful’ as $15 Billion in Sales Have Been Lost. https://finance.yahoo.com/news/nvidia-ceo-china-chip-ban-deeply-painful-as-15-billion-in-sales-have-been-lost-as-a-result-162124142.html
- New York Times. (2025, April 15). Nvidia H20 Chip and the China Restrictions. https://www.nytimes.com/2025/04/15/technology/nvidia-h20-chip-china-restrictions.html
