How AMD is Navigating Escalating US-China Trade Tensions in 2025

The US-China trade war has escalated to a point where even the semiconductor industry’s supply chains are being reshaped by geopolitical forces. For AMD, a US-based chipmaker at the heart of AI and cloud infrastructure, the challenge is twofold: maintain growth while navigating punitive tariffs, export restrictions, and supply chain fragmentation. Here’s how AMD is adapting—and why investors should take note.

A Manufacturing Shift to Avoid Geopolitical Crosshairs

AMD’s most critical move is its deepening partnership with TSMC’s Arizona fabrication facility, where production of its fifth-generation EPYC “Turin” processors has begun. These chips, designed for data centers and AI workloads, will be shipped starting in mid-2025. By moving manufacturing to the US, AMD avoids the 125–145% tariffs China imposes on US-made tech imports.

This isn’t just about tariffs. The US government’s restrictions on exporting advanced AI chips to China—like AMD’s MI300X series—have cut annual revenue by an estimated $1.5 billion. By producing in the US, AMD ensures its chips qualify for exemptions and can compete in non-Chinese markets.

Diversifying Supply Chains with Vertical Integration

AMD’s $1.5 billion acquisition of ZT Systems in early 2025 signals a bold push into vertical integration. ZT’s expertise in rack-scale system design allows AMD to deliver pre-configured AI infrastructure to hyperscalers like Oracle, which is deploying AMD’s MI350X accelerators in a multi-billion-dollar cloud cluster. This reduces lead times and supply chain complexity for customers, while ensuring AMD’s hardware is embedded in critical infrastructure.

The partnership also addresses a key vulnerability: global supply chain bottlenecks. By co-designing systems with ZT, AMD can streamline production for its next-gen MI400 series GPUs (due in 2026), which promise leadership performance in AI training and inference.

Navigating Tariffs with Creative Workarounds

AMD’s financial statements reveal the cost of trade tensions. In Q1 2025, the company took an $800 million charge to write down inventory of China-spec chips blocked by US export controls. Yet AMD is fighting back with tactical adjustments:

• Re-routing shipments: By manufacturing in Vietnam and Thailand (via partners like Samsung), AMD avoids US-China tariff zones.
• Leveraging bonded warehouses: Delaying tariff payments until goods reach final markets has become standard practice.
• Focus on untethered markets: Revenue from AI and data-center products grew 52% year-over-year in Q1 2025, driven by non-Chinese demand.

A Strong Foundation for Long-Term Growth

AMD’s strategy isn’t just about survival—it’s about positioning itself to dominate in a fragmented world. Key catalysts include:
1. The TSMC 2nm node: AMD’s next-gen Venice processors, built using TSMC’s most advanced technology, will power supercomputers and AI models by 2026.
2. Software ecosystem dominance: ROCm 6.4, AMD’s AI software suite, now supports over 150 server platforms, reducing integration costs for customers.
3. Client computing resilience: Ryzen CPUs drove a 68% year-over-year revenue surge in Q1 2025, fueled by gaming GPUs like the Radeon RX 9070 series.

Conclusion: AMD’s Strategic Resilience Pays Off

Despite $1.5 billion in annual revenue losses due to trade restrictions, AMD’s Q1 2025 revenue hit $7.4 billion (midpoint of guidance), up 27% year-over-year. Its focus on US manufacturing, vertical integration, and software differentiation has insulated it from geopolitical headwinds.

Investors should note two critical metrics:
1. Margin stability: AMD’s gross margin held steady at 45% in Q1 2025, despite write-downs, thanks to cost discipline and high-margin data-center sales.
2. Pipeline strength: With over 150 server platforms certified for its EPYC chips and partnerships like Cisco’s firewall adoption, AMD is building a moat in AI infrastructure.

In a world where supply chains are redrawn by politics, AMD’s agility—rooted in US manufacturing, strategic acquisitions, and product leadership—positions it as a beneficiary of the new global tech order. For investors, this is a stock to own for the next decade of AI-driven growth.