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Nvidia: US Will Get a Piece of the Action in AI Chips Sold Into China

We maintain our fair value estimate for Nvidia stock.

The Nvidia logo is displayed on a sign at the Nvidia headquarters on February 26, 2025 in Santa Clara, California.
Justin Sullivan via Getty
Securities in This Article
Advanced Micro Devices Inc
(AMD)
NVIDIA Corp
(NVDA)

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Nvidia NVDA and Advanced Micro Devices AMD are expected to soon receive the previously announced export licenses from the US government to sell artificial intelligence chips into China. In exchange, the companies have agreed to pay the US government 15% of the revenue from these chip sales.

Why it matters: First reported by the Financial Times, the 15% payment is unusual and surprising. Various reports suggest that no similar structure has ever been agreed upon as part of an export license.

  • We consider this news as part of a larger story in semiconductor regulations. Semis are exempt from tariffs in the US today, but they could reportedly spike to 100%. Meanwhile, manufacturers are expanding production in the US. Ultimately, we anticipate more deals coming soon.

The bottom line: We maintain our $170 fair value estimate for wide-moat Nvidia as well as our Very High Uncertainty Rating. Not only is the future size of AI still uncertain, but global regulatory environments around AI are unpredictable and can change rapidly.

  • At this point, we think of this payment as effectively a tax on the gross margin dollars of AI chip sales into China. However, the structure, and even the legality, of such payments remains in question.

Coming up: We still estimate that Nvidia will sell $30 billion of AI chips into China in fiscal 2027 (which is effectively calendar 2026), and a 15% tax could reduce our fiscal 2027 net income estimates by about 4%. We don’t think the tax will stall either Nvidia’s sales or China’s adoption in any way.

  • Our $30 billion revenue estimate would represent 16% of our $182 billion data center revenue estimate for Nvidia in fiscal 2027. Before restrictions, China accounted for as much as 20% of revenue in Nvidia’s data center segment.
  • We hope to learn more about this agreement along with Nvidia’s earnings report on Aug. 27.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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