Nvidia and AMD wavered Monday as Wall Street reacted to news that the tech giants have agreed to give the U.S. government 15% of China chip sale revenue.
Nvidia stock traded sideways in the morning, last down a fraction on media reports that the two AI chip giants have agreed to what's been described as an unusual and potentially risky arrangement with the Trump Administration. AMD bounced back from early morning losses and was up around 1%.
"(President Donald) Trump wants a China AI pay-to-play?" Bernstein Research analyst Stacy Rasgon wrote in a client note. "We suppose 85% is better than zero%, but we aren't sure we like the precedent."
Nvidia Stock: What 'China AI Pay-To-Play' Means
News of the deal was the latest twist in the battle over allowing major U.S. chip companies to sell their products in China.
Both companies have faced strict restrictions on selling powerful semiconductors to the Asian nation, amid national security concerns.
Last month, after Nvidia CEO Jensen Huang met with Trump and federal policymakers in Washington D.C., the Silicon Valley giant announced that the White House had agreed to let the Silicon Valley giant resume selling its H20 AI chips to China.
Nvidia stock jumped on the news.
But "news about government payments required in return colors it a bit," Rasgon wrote.
Allowing Nvidia and AMD to sell AI chips in China is a smart move, he argued, because "failure to do so effectively hands the Chinese AI market over to Huawei, and encourages the coalescence of Chinese developers around Huawei's architecture and ecosystem."
But the implications of the reported agreement are unclear, he said.
"Will other companies be required to pay to sell into the region?" Rasgon wrote. "It feels like a slippery slope to us. We aren't really sure what the purpose is. Sure it might raise some money, but doesn't seem to address any strategic issues beyond a grab for dollars."
