Nvidia and AMD's 15% Revenue Pledge to the U.S. for China Chip Sales: Geopolitical Risk and Supply Chain Implications

The semiconductor industry has long been a battleground for geopolitical strategy, but the recent 15% revenue-sharing agreement between the U.S. government and companies like Nvidia (NVDA) and Advanced Micro Devices (AMD) marks a new frontier. This arrangement, secured under the Trump administration in 2025, allows these firms to resume sales of mid-tier AI chips like the H20 and MI308 to China—but at a cost. By ceding 15% of their China-derived revenues to the U.S. Treasury, these companies are navigating a precarious balance between market access and profitability. For investors, the question is whether this model is sustainable—and what it means for the resilience of the global tech supply chain.

Geopolitical Risk: A New Pricing Mechanism

The 15% revenue pledge is not a tax but a strategic concession to U.S. export controls. It reflects a broader shift in how geopolitical risks are being priced into semiconductor stocks. Historically, investors assessed risks like trade wars, sanctions, or regulatory shifts through macroeconomic lenses. Today, the calculus is more granular: companies must now negotiate access to critical markets while surrendering a portion of their profits to governments.

For Nvidia, this means projected H20 sales in China could generate $23 billion in 2025, but $3.45 billion will flow back to the U.S. government. Similarly, AMD faces a 15% cut on MI308 sales, which could add $3 billion in recurring revenue. While these figures suggest short-term gains, they also highlight a structural vulnerability: the U.S. government's ability to extract financial concessions in exchange for easing export restrictions.

This dynamic introduces asymmetric risk. If U.S.-China relations deteriorate further, the Trump administration could tighten controls or demand higher revenue shares. Conversely, if tensions ease, the U.S. might reduce its stake. Investors must now factor in the political volatility of such arrangements, which are not bound by traditional regulatory frameworks.

Supply Chain Resilience: A Double-Edged Sword

The U.S. strategy of leveraging export controls to secure financial returns from chipmakers has broader implications for supply chain resilience. On one hand, it reinforces American dominance in semiconductor technology by ensuring that even when chips are sold to China, a portion of the value remains in the U.S. This aligns with the CHIPS and Science Act of 2022, which injected $32.5 billion into domestic manufacturing.

On the other hand, the 15% revenue pledge could fragment the global supply chain. By creating a precedent where access to foreign markets requires paying a “geopolitical toll,” the U.S. risks incentivizing China to accelerate its self-reliance in chip design and manufacturing. Companies like Huawei and SMIC are already making strides in this area, and the U.S. policy could inadvertently accelerate their progress.

Moreover, the arrangement exposes the fragility of U.S. export control policies. While the Trump administration's 2025 reversal of H20 export bans boosted investor confidence, it also underscores how quickly policy can shift. The Biden administration's 2023 outbound investment restrictions and the Trump-era focus on “chokepoint” technologies (e.g., EUV lithography) highlight the lack of long-term coherence in U.S. strategy. For investors, this means supply chain resilience is not guaranteed—it's a moving target shaped by political cycles.

Investment Implications: Balancing Access and Profitability

For Nvidia and AMD, the 15% revenue pledge is a double-edged sword. While it preserves access to China's AI market—a critical growth driver—it also compresses margins. This is particularly concerning for AMD, which previously took an $800 million writedown on halted MI308 sales. The company's projected 28% year-over-year revenue growth in Q3 2025 hinges on the assumption that U.S. export policies remain stable—a big ask in a volatile geopolitical climate.

Investors should also consider the broader ecosystem. Foundries like TSMC (which produces chips for both companies) and equipment makers like ASML (supplier of EUV lithography machines) are indirectly affected. If U.S. policies force chipmakers to prioritize domestic production, TSMC and ASML could see reduced demand from China, a market that accounts for 40–50% of their revenue. This creates a ripple effect across the supply chain, with potential knock-on impacts for investors in the wafer fab equipment (WFE) sector.

The Road Ahead: A Call for Pragmatism

The 15% revenue pledge is a short-term fix for a long-term problem. While it allows U.S. chipmakers to retain a foothold in China, it does not address the root issue: the U.S. cannot indefinitely control the flow of technology in a globalized world. For investors, the key takeaway is to diversify exposure.

• Nvidia and AMD remain compelling long-term plays due to their leadership in AI and data center technologies, but their valuations should be discounted for geopolitical risk.
• TSMC and ASML offer exposure to the global supply chain but face higher volatility due to their reliance on China.
• Emerging markets in India and Southeast Asia could become new growth engines if U.S. policies shift toward de-risking rather than decoupling.

In the end, the semiconductor industry's resilience will depend on its ability to navigate geopolitical turbulence without sacrificing innovation. For now, the 15% revenue pledge is a reminder that in the AI era, technology and politics are inseparable. Investors who understand this dynamic will be best positioned to capitalize on the opportunities—and mitigate the risks—that lie ahead.