Shares of Nvidia Corp. and Advanced Micro Devices Inc. slipped in premarket trading on Monday after agreeing to hand over 15% of revenue from sales of advanced chips to China to the US government.
The move comes months after the Trump administration halted sales of Nvidia's H20 chips to China in April. Nvidia had announced in July that deliveries would resume. On Monday, Nvidia shares were down about 0.57% lower, while AMD was down 1.22% in premarket trade as of 6:10 p.m. IST.
Nvidia has warned that losing access to China for its H20 chips could wipe $8 billion off sales in its July quarter. AMD has projected a $1.5 billion revenue hit this year from the curbs.
US Commerce Secretary Howard Lutnick said last month that the planned resumption of AI chip sales was part of talks with Beijing to secure rare earth supplies. He described the H20 as Nvidia's "fourth-best chip" and argued it was in Washington's interest for Chinese companies to keep using American technology even if the most advanced products remain off-limits, so they stayed on a US "tech stack."
China accounted for $17 billion, or 13%, of Nvidia's revenue in the fiscal ended Jan. 26. AMD generated $6.2 billion from China in 2024, representing 24% of total sales.
Bernstein analysts estimated that the 15% revenue transfer would cut gross margins on these processors by 5 to 15 percentage points, trimming overall gross margins by roughly one point.
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