Nvidia, AMD to Pay US 15% of China AI Chip Sales Revenue

Benzinga

Advanced Micro Devices (NASDAQ:AMD) shares climbed Monday after the chipmaker agreed to pay 15% of its China AI chip sales revenue to the U.S. government in exchange for export licenses for its MI308 processors. The Trump administration imposed the condition amid security concerns over potential Chinese military applications. Nvidia (NASDAQ:NVDA) has agreed to similar terms for its H20 chips. The deal comes as reports surfaced last week that President Donald Trump plans to impose roughly 100% tariffs on semiconductor makers not manufacturing in the U.S.

Transcript

00:00Okay. The big piece of news here, we'll check the NVIDIA and AMD charts right after this,

00:06but I definitely want to start with this one here. Peter Schiff and the Kobisi letter warn

00:12of a federal shakedown over NVIDIA and AMD's 15% chip revenue deal with the Trump administration.

00:19There are a link to a number of other tweets here in this story. So go ahead and check out

00:24the story if you want to go through some of the different, if you want to go through some of the

00:28different threads here. Okay. Let's talk about this. NVIDIA and AMD, two of the world's leading

00:34chip makers have reportedly agreed to pay a 15% of their revenues from chip sales in China to the

00:39US government as part of a deal to secure export license. This deal, which was a condition for

00:45the companies to sell their advanced AI chips, the H20 for NVIDIA and the MI308 for AMD in China

00:50has sparked controversy or controversy as they say across the pond and draw significant criticism

00:56from financial commentators. Schiff, not surprisingly, voiced strong opposition to the

01:02deal, labeling it as unconstitutional. Following the publication of the news over the weekend,

01:07Schiff took to X, formerly Twitter, and argued that the payments to the US government represent,

01:11quote, a federal shakedown, end quote, specifically criticizing the arrangement where companies

01:17pay based on revenue, not profit. The Kobisi letter took to X, highlighting the significant shift

01:25that the deal represents. The commentator warned that this marks a new era in trade negotiations

01:31where the Trump administration now negotiates on a company-by-company basis for trade deals.

01:38Quote, most people don't even realize how massive this announcement truly is, end quote. This covers 15%

01:44of revenue from China, not profit, both for NVIDIA and AMD. The trade war just entered a new era.

01:51Oh my God, hug your loved ones, folks. We're in huge trouble. The deal comes as the Trump

01:57administration has relaxed earlier export bans on NVIDIA's H20 chips to China, which has been imposed

02:03due to national security concerns. Despite these concerns, NVIDIA defended the arrangement, stating

02:08that it follows the rules set by the US government for participation in worldwide markets. Now, really

02:14quick, let's go back to Pro, and let's actually take a look at two of these charts, which are being

02:19affected by this right away. We'll start here with NVIDIA. NVIDIA, ooh, ooh, it looks like it's

02:25pared back some of its gains. Okay, so first things first here, NVIDIA actually looks very much like

02:29the spy chart, at least recently here. It does look like it's trying to take out the new highs

02:33that were set the same day here, Thursday, July 31st, the last day of July. If we look inside here,

02:39this is how the market reacted, right? As soon as the pre-market opened here, NVIDIA actually sold

02:46off. But for the rest of the morning here, it's actually been bid back to about even. We're down

02:51three-tenths of a percent here, down only 50 cents. This is setting up a possible red-green move here,

02:57so we'll see if that ends up taking place. Quick look at AMD's chart, I beg your pardon,

03:03shows almost the same thing. Same type of reaction here, an immediate move down on the opening of the

03:08pre-market. But as investors digest this news, it continued to climb back up.

03:15If we go back to the daily chart, you can hear what we look like on AMD. Almost said AMC there,

03:23but AMD, one thing that you might note right off the bat here is we have a little bit of a trend

03:28line. That actually represents a key level. Also worth noting, we are three points or just about

03:33four points above the 20-day moving average. I think as long as we want to keep the short-term

03:38trend intact here, we probably want that 20-day moving average to stay intact. But nonetheless,

03:43this is going to be a trend line that we're going to look for here. Let me go back to the actual story

03:48here. Oh, no, excuse me. This was the one that we just finished. There's another one for this.

03:55NVIDIA's H20 chips under fire in China over security fears. So interesting. We'll draw

04:03another hypothetical here for what's going on. The H20 artificial intelligence chips are facing

04:08mounting security concerns in China with state media and regulators, raising alarms about potential

04:14backdoor risks while the U.S. government secures revenue-sharing deals for the chip market exports

04:19license. So, okay, a couple of things here. So, number one, there was obviously a huge worry about

04:27there being backdoor in a lot of the Chinese technology that gets used here in America.

04:32We've actually seen it in a number of applications. Perhaps the scariest one that doesn't get talked

04:37about enough are some of the big industrial-sized transformers that are used to power our power grid,

04:42which all are made in China and have backdoors. That's been covered pretty extensively by some

04:48of the security experts that appear on things like the Sean Ryan Show and things of that nature.

04:53Not really talked a lot about in the mainstream media. The interesting thing here is now China

04:59appears to be accusing the U.S. of putting backdoor in their chips. So, the first thing that I would

05:06ask you is, what if this is like a 4D chess move where they're like, oh, well, the CCP can spy on

05:11Americans? Well, we'll try and do the same thing. You can have these chips. NVIDIA will pay us a little

05:16bit, but maybe there's a backdoor in there. Let me know if you guys think that's possible.

05:21NVIDIA's H20 chips have come under fire in China with the state media and the Cyberspace

05:25administration of China raising alarms about a potential security risk, including the possibility

05:29of backdoor features that could bypass authentication and allow remote access. Sounds familiar, doesn't

05:35it? On Sunday, an article by Yuan Tantian, if I pronounced that correctly, a social media account

05:42linked to the state broadcaster CCTV alleged that the NVIDIA H20 chips are not only environmentally

05:48unfriendly. Wait, they're saying that chips are environmentally unfriendly while they're

05:53starting new coal-fired power plants at a rate greater than anywhere else in the world?

05:58Cool story, bro. Cool story. But they're also potentially unsafe for Chinese consumers.

06:03In the article, Yuan Wen criticized the chip, saying that, quote, when a type of chip is neither

06:10environmentally friendly nor advanced nor safe, as consumers, we certainly have the option to not

06:16buy it, end quote. Yeah, you do. Yeah, you do. The article followed earlier criticism by the

06:22People's Daily, which called on NVIDIA to provide, quote, convincing security proofs,

06:27end quote, to alleviate concerns over the safety of these chips. NVIDIA has vehemently denied these

06:33allocations, stating that its products contain no backdoors and that are built to comply with U.S.

06:37regulations. A company spokesperson reiterated that the chips are designed to meet export control laws

06:42and that the company has taken steps to ensure security in its products. NVIDIA designed the H20

06:48chips specifically for the Chinese market after the U.S. imposed export restrictions on a more advanced

06:53AI chips in 2023. However, a reversal of the original ban, the Trump administration allowed

06:58NVIDIA to resume the sales of H20 chips to China in July 2025, provided the company adhere to certain

07:04conditions. These conditions reportedly included NVIDIA agreeing to pay 15 percent of its revenues from

07:09chip sales in China to the U.S. government in exchange for the license. Despite the U.S. policy

07:15reversal, NVIDIA faces increased competition from domestic Chinese chip makers like Huawei

07:20Technology, Canbercon, and Haigon. Huawei is the one that we have heard here for years in terms of

07:26them having a potential backdoor or some means of spying on Americans. Analysts predict NVIDIA

07:33shares of China's AI chip market will decline in 2025 as local companies aggressively expand.

07:39So there you go. I definitely couldn't do anything but chuckle when China is saying that they are worried

07:48about environmental stuff. I mean, what a load of hogwash that is. But this other aspect here about the

07:54potential backdoor, how fitting would that be if the United States brokered some deal where they could then

08:00have a backdoor into chips being sold to China? Now, I don't know if that's the case. Frankly, I don't really

08:05care. But that's what's going on out there. And I think that that should make this interesting. I think

08:11that should make it interesting. We'll see.

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