Nvidia and AMD Stocks Dip: Revenue Sharing Deal For China Chip Sales To Hit Margins

Nvidia (NVDA) and Advanced Micro Devices (AMD) have reportedly struck a deal with the U.S. government, agreeing to allocate 15% of their revenue from AI chip sales in China to the U.S. Treasury. This concession secures export licenses, allowing both companies to resume sales of specific AI chips, notably Nvidia's H20 and AMD's MI308, to the Chinese market.

As news, and the implications of the deal is being digested by the street, Nvidia's stock has moved lower in the pre-market, down 1.41%, while AMD's stock is 2.66% lower than where it closed out Friday. 

The agreement follows stringent export controls imposed in April 2025 by the Trump administration, halting the sale of advanced AI chips to China over national security concerns. Nvidia faced a potential loss of up to $5.5 billion due to these restrictions, while AMD confronted an $800 million inventory write-off related to its MI308 chips.

To regain access to the Chinese market, Nvidia and AMD acquiesced to the U.S. government's demand for a 15% revenue share. This arrangement seeks to balance economic advantages with national security considerations, addressing concerns about China's access to cutting-edge AI technology.

China is a crucial market for both companies.

In the previous fiscal year, Nvidia generated $17 billion (13% of its total revenue) from China, while AMD reported $6.2 billion (24% of its total revenue) from the same market. Analysts project that Nvidia could generate $23 billion from H20 chip sales in China in 2025, potentially resulting in $3.45 billion being paid to the U.S. government under the new agreement.

The agreement between Nvidia, AMD, and the U.S. government represents a significant development in the intersection of technology, trade, and national security. While it provides a pathway for these companies to recover from previous financial losses and re-enter the Chinese market, it also raises important questions about the balance between economic interests and security considerations.