NVIDIA, AMD to Share 15% of China AI Chip Sales with US Government

Bernstein analysts have criticized the agreement between NVIDIA and AMD, which mandates that the companies hand over 15% of their AI chip sales revenue in China to the U.S. government in exchange for export licenses. The analysts view this agreement as setting a dangerous precedent, but also acknowledge that retaining 85% of the revenue is better than receiving nothing at all.

Led by Stacy Rasgon, the analyst team believes that allowing NVIDIA and AMD to sell AI chips to China is a more reasonable approach. They argue that even with the 15% revenue share, retaining 85% is better than receiving nothing at all. However, they do not endorse the precedent set by this agreement, questioning whether this model will only apply to regulated products and if other companies will also be required to pay to enter the market. They view this as a slippery slope that could have broader implications.

The analysts are uncertain about the purpose of this agreement. While it may generate some revenue for the U.S. government, it does not seem to address any strategic issues. They also point out that companies are likely to pass on this cost to customers, particularly NVIDIA, whose products have high demand and significantly larger order volumes compared to AMD.

Rasgon's team mentioned that NVIDIA is developing new products based on the Blackwell architecture for the China market. These products are reportedly compliant with existing technological thresholds, thus not requiring export licenses. NVIDIA seems to believe that market demand will shift towards these new products over time, rather than the existing Hopper architecture products.

The analysts further noted that the news reports specifically mention the H20 (and AMD's MI308), indicating that the 15% revenue share is part of the export license approval agreement. Therefore, it is reasonable to assume that the updated, compliant Blackwell products may not be affected by this agreement.