Trump-Era Policies and the AI Chip Sector: Geopolitical Risks Reshape Profitability and Competitive Dynamics

The Trump administration’s aggressive reshaping of U.S. semiconductor policy has created a volatile landscape for AI chipmakers, blending geopolitical strategy with corporate finance. By imposing revenue-sharing agreements, direct government equity stakes, and export controls, the administration has sought to balance national security concerns with the need to sustain American technological leadership. However, these interventions have introduced significant risks and uncertainties for firms like Intel, Nvidia, and AMD, altering their profit margins and competitive positioning.

A cornerstone of Trump’s approach has been the 15% revenue-sharing deal with Nvidia and AMD for AI chip sales to China. This policy, justified as a compromise between access to China’s lucrative market and U.S. security interests, has had mixed financial outcomes. While it allowed these firms to retain a foothold in China, it also reduced their effective margins. For example, Nvidia’s delayed shipments of H20 AI chips in Q2 2025—due to regulatory uncertainty—cost the company billions in potential revenue, despite a 56% year-on-year revenue growth [3]. The administration is now considering even steeper terms, such as a 30%–50% cut for next-generation Blackwell chips, which could further erode profitability [3].

Simultaneously, the Trump administration has taken a more direct role in corporate strategy through the CHIPS Act. The most striking example is the $8.9 billion equity stake in Intel, effectively giving the U.S. government a 9.9% ownership in the company [1]. This move aimed to stabilize Intel’s domestic manufacturing and counter its declining market share (down to 63% in data center servers by 2025) [6]. While such investments provide short-term liquidity, they raise concerns about crony capitalism and reduced innovation incentives. Critics argue that government-backed subsidies distort market competition, favoring politically connected firms over merit-based growth [1].

The administration’s broader AI Action Plan—emphasizing export controls and domestic manufacturing—has also introduced regulatory complexity. For instance, reduced oversight for CHIPS-funded projects may lower compliance costs for firms like TSMC, which received $6.6 billion in direct funding [3]. Yet, these policies risk creating a fragmented global supply chain, as U.S. firms face stricter export restrictions compared to their international peers. This could weaken their long-term competitiveness, particularly in markets where China’s demand remains critical [3].

For investors, the implications are twofold. First, Trump-era policies have created a “state-directed capitalism” model, where profitability is increasingly tied to government approval and geopolitical alignment [4]. Second, the administration’s focus on national security has prioritized short-term stability over long-term innovation, with mixed results. While Intel’s stock has benefited from its government-backed turnaround, Nvidia’s stock dipped 3.5% post-earnings in 2025, reflecting market skepticism about the sustainability of its China-driven growth under tighter controls [3].

The administration’s approach underscores a broader tension: how to balance geopolitical risk with corporate profitability in a sector defined by rapid technological change. For now, U.S. chipmakers appear to be navigating this tightrope, but the long-term consequences—whether in terms of innovation, market share, or financial resilience—remain uncertain.

Source:
[1] U.S. takes 10% stake in Intel, Trump says [https://www.nbcnews.com/business/business-news/intel-agrees-us-stake-in-company-how-much-what-to-know-rcna226667]
[2] Why Trump's business deals with Nvidia, Intel and other companies is really a tax on all of us [https://www.morningstar.com/news/marketwatch/20250828186/why-trumps-business-deals-with-nvidia-intel-and-other-companies-is-really-a-tax-on-all-of-us]
[3] Nvidia, AMD Reach Deal to Give US a Cut of China AI Chip [https://finance.yahoo.com/news/nvidia-amd-pay-us-15-014239248.html]