Nvidia's Tariff Impact Assessed

Nvidia and AMD will pay the U.S. government 15% of their revenue from Chinese AI chip sales to secure export licenses. This agreement allows them to re-enter China's AI chip market but introduces a political tariff, potentially pressuring profit margins. The Trump administration views this as a way to protect U.S. interests while allowing controlled access to Chinese buyers.

Nvidia's H20 processors and AMD's MI308 chips are affected. The agreement has sparked debate, with some questioning whether it prioritises security or financial gain for the government. Experts are divided on the long-term impact, with bullish analysts predicting a stock surge if Chinese clients rush to secure AI chips. Bearish analysts, however, suggest the revenue cut and competition from domestic chipmakers could limit Nvidia's upside.

Investor reaction saw Nvidia shares dip slightly, while AMD fell more noticeably. The financial impact on Nvidia's earnings will become clearer in upcoming quarterly results. This arrangement sets a precedent that could influence future export licensing terms and impact global semiconductor supply chains.