President Trump has had a busy week making moves across the US chip industry. And it’s only Wednesday. On Monday, Trump revealed his administration will take a 15% cut of sales of Nvidia (NVDA) and AMD’s (AMD) chips to Chinese companies in exchange for allowing the AI hardware to flow back into the country.
He also met with Intel (INTC) CEO Lip-Bu Tan on Monday after calling for his ouster last week. At the end of the day, Trump appeared to back away from his initial demand, saying Tan’s “success and rise is an amazing story.”
On their face, the developments appear to be positive for the trio of chip giants. But Trump’s lightning-fast whiplash between stances raises important questions about the companies’ futures, including whether Nvidia and AMD will be able to continue selling their chips in China, despite the administration’s prior protestations about national security concerns, and what kind of toll the president will extract from Intel moving forward.
Nvidia and AMD get a win… for now
Trump’s decision to restart the sale of Nvidia and AMD chips into China for a fee means both companies will be able to recoup some of the losses they took when he initially banned processor shipments there in April.
Nvidia had to write off $4.5 billion due to the ban in Q1, with an additional $8 billion hit expected in Q2, while AMD reported an $800 million loss in Q2.
“[The] companies can use some part of their prior written-off inventory so even with 15% penalty they get some gross profit recovery, and … China resumption maintains the original goal of engaging with an important (China) AI ecosystem and of potentially keeping competitors (Huawei) in check,” BofA Global Research analyst Vivek Arya wrote in a research note following Trump’s announcement.
Nvidia, in particular, could end up passing along the 15% fee to its China-based customers, thanks to the strong demand for its offerings.
“From my perspective, it is a positive for those companies,” Forrester senior analyst Alvin Nguyen told Yahoo Finance. “As you know, it opens a market where there’s still high demand. Nvidia, especially, still has a lot of cache with their name.”
But Trump’s latest AI chip move also introduces some thorny questions. The first of which is whether Nvidia and AMD will continue to be able to sell their AI processors into China moving forward, or if Trump will change his mind again.
After all, the administration originally pulled Nvidia’s H20 and AMD’s MI308 on national security grounds, and as Bernstein analyst Stacy Rasgon explained to Yahoo Finance, this deal doesn’t appear to address the matter.
Arya similarly warns against getting too comfortable with the idea of China as a reliable source of revenue for either company.
“It isn’t clear if [the US government] will continue to provide approvals next year,” he wrote in a research note. “Restarting supply chains to produce more AI chips could take 8-9 months … [and the] rapidly evolving AI landscape could reduce demand from certain China customers.”
There’s another problem lurking for Nvidia, though. According to The Information, Chinese officials are urging companies like ByteDance, Alibaba Group (BABA), and Tencent Holdings (TCEHY) to suspend the purchase of Nvidia chips over potential security concerns.
Nvidia says its chips don’t pose any kind of security threat.
“As both governments recognize, the H20 is not a military product or for government infrastructure. China has ample supply of domestic chips to meet its needs,” an Nvidia spokesperson wrote in an email to Yahoo Finance.
“It won’t and never has relied on American chips for government operations, just like the U.S. government would not rely on chips from China. Banning the sale of H20 in China would only harm US economic and technology leadership with zero national security benefit.”
All of this comes amid the backdrop of the US and China’s ongoing trade negotiations, leaving Nvidia and AMD uniquely vulnerable to further political intrigue.
Intel’s Trump meeting
Intel is also contending with its own Trump-related issues. Last week, the president said in a Truth Social post that Tan was “highly conflicted and must resign,” adding that there was “no other solution to this problem.”
Trump’s statement came after Republican Sen. Tom Cotton sent a letter to Intel questioning Tan’s investments in Chinese companies.
It didn’t help that the Justice Department announced in July that Cadence Design Systems, where Tan previously served as CEO, would pay a $140 million settlement related to charges about shipping chip design products to a Chinese military university. Tan also has a number of investments in Chinese companies.
Intel responded in a statement saying Tan, the company, and its board are aligned with Trump’s “America First agenda.”
After Tan’s meeting with the president on Monday, the company released an additional statement saying, “We appreciate the president’s strong leadership to advance these critical priorities and look forward to working closely with him and his administration as we restore this great American company.”
Trump, for his part, said in a Truth Social post that the meeting was interesting and that his members will meet with Tan to give him suggestions over the next week. It’s unclear what the suggestions would be for.
In a research note, Rasgon wrote that Intel could petition for “further support, both monetary and, conceivably, through customer ‘encouragement’ either for volume … or more direct investment.”
The biggest question then is what Trump will seek from Intel in return for his help.
“We do know [Trump] tends to be transactional, and loves making deals where he (and, hopefully, the US too?) come out ahead,” Rasgon wrote.
“Would a successful Intel be enough all by itself to satiate that desire? We aren’t sure, but given recent behavior (just yesterday extracting dollars from [Nvidia] and AMD to sell AI chips into China) we feel that his largesse, if obtained, likely won’t come free.”
Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X/Twitter at @DanielHowley.
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