Key Points
- Nvidia will have to give the U.S. government 25% of the revenue it derives from sales of its new H200 AI chip to customers in China.
- This cut is higher than the 15% of revenue from sales of the H20 chip to China that was negotiated in August.
- The H200 chip is more powerful than the H20 chip, but not as powerful as the Blackwell AI chips Nvidia is selling to customers in the U.S. and allied nations.
Shares of the artificial intelligence(AI) giant gained 2.3% in Monday's after-hours trading, which bodes well for
Tuesday's price action.
Nvidia (NASDAQ:NVDA) stock gained 2.3% in after-hours trading on Monday, following President
Donald Trump's reportedly posting on Truth Social that the U.S. government will
allow Nvidia to export its new H200 artificialintelligence (AI) chips to select customers in China. Nvidia will haveto pay the government 25% of its revenue derived from the sales of these chips
to Chinese customers.
Trump reportedly stated that the same dealallowing AI chip exports to China would also apply to Nvidia's rivals, such
as Advanced Micro Devices (AMD) and Intel.
Granted, 25% is a hefty cut, but Nvidiaboasts large profitmargins, so it should be able to pay such a cut while still generating asignificant profit on these chips.
And certainly for investors, some profitgenerated from sales of data center AI chips to China is better than no sales
of data center AI chips to China.
The H200 is Nvidia's new data center AIchip for the Chinese market
The H200 is Nvidia's new data center AIchip for the Chinese market. It's more powerful than the H20 chip, which was
Nvidia's prior chip specifically for China. However, it's not as powerful as
Nvidia's graphics processing units (GPUs) based on its Blackwell architecture,
which are its current data center AI chips for U.S. customers and customers in
allied nations.
Earlier this year, the U.S. governmentenacted export controls on H2O, essentially restricting Nvidia from selling it
to China. The government cited national security reasons. Then, in August,
there was an about-face when the Trump administration announced thatit would begin issuing licenses for Nvidia to sell its H20 chip to select
Chinese customers, and that Nvidia would give the government a 15% cut of the
revenue derived from these sales.
However, according to reports, the Chinesegovernment instructed Chinese companies not to buy Nvidia's H20 chip. So,
Nvidia has had very little to no sales of the H20 for the last couple of
quarters.
It remains to be seen whether the Chinesegovernment will take similar actions regarding the H200. However, I don't think
this will be the case because the H200 is notably more powerful than the H20
and reportedly more powerful than the AI chips made by Chinese companies. In
other words, the H200 chips should be hard for China to pass up.
Good news for Nvidia and its investors
Early reports on this H200 news indicatethat Trump's decision is controversial, as some individuals have concerns about
China gaining access to these more powerful AI chips.
Nonetheless, for Nvidia and investors inNvidia stock, this H200 news is good news. Nvidia should see a boost in revenue
and profits in future quarterly reports, assuming the Chinese government
doesn't instruct Chinese companies to refrain from buying the H200 chip.