AMD's China AI Sales Hit Minimal Impact on Bottom Line, Citi Says

AMD agreed to give the US government 15% of its AI GPU sales in China to obtain export licenses. Citi analyst Christopher Danely says this is largely immaterial to AMD's bottom line, as it mainly impacts low-margin products. Growth drivers remain AMD's mainstream AI GPUs, fueling AI sales forecasts of $6.2 billion in 2025 and $9.9 billion in 2026. Danely maintained a Neutral rating on AMD with a $180 price target.

Advanced Micro Devices (AMD) has agreed to share 15% of its AI GPU sales in China with the U.S. government in exchange for export licenses. This arrangement, which is part of a broader strategy to control advanced chip sales to China, has been described as highly unusual by industry experts. The move comes as Nvidia, another major AI chipmaker, has already been granted similar export licenses following a meeting between Nvidia's CEO Jensen Huang and former U.S. President Donald Trump [2].

The revenue-sharing agreement is expected to have a minimal impact on AMD's bottom line, according to Citi analyst Christopher Danely. Danely stated that the revenue-sharing arrangement mainly affects low-margin products, and growth drivers for AMD remain its mainstream AI GPUs. The analyst forecast AI sales for AMD to reach $6.2 billion in 2025 and $9.9 billion in 2026 [3]. Despite the revenue-sharing arrangement, Danely maintained a Neutral rating on AMD with a $180 price target.

The agreement underscores the strategic importance of the Chinese market for American chipmakers. China remains a vital revenue source, accounting for a substantial portion of their sales. However, the restrictions and conditions imposed by the U.S. government on chip exports to China have created a complex landscape for these companies.

Nvidia and AMD are now poised to benefit from the reopening of the Chinese market, but the agreement to share 15% of sales with the U.S. government highlights the ongoing tensions between the U.S. and China on semiconductor export controls. The U.S. stock market continues to rise, with the Nasdaq Composite closing at a fresh all-time high, despite the recent volatility caused by tariffs and trade policies [2].

References:
[1] https://www.cbsnews.com/news/nvidia-amd-chip-sales-china-15-percent-h20-mi308/
[2] https://www.ainvest.com/news/government-gains-slice-ai-pie-nvidia-amd-agree-pay-15-china-chip-sales-exchange-export-licenses-2508/
[3] https://www.marketbeat.com/originals/amd-paves-path-for-market-share-gains-stock-rally-has-just-begun/