By Ahmad Assiri Research Strategist at Pepperstone
This arrangement comes less than two months after Washington eased certain export restrictions on semiconductors to the Chinese market. The deal covers Nvidia’s H20 and AMD’s MI308 chips, both now prerequisites for securing export licenses, allowing the companies to access a market that remains lucrative despite the new 15 % US curb. Current curbs involve an unprecedented 15% top line tax and also a requirement to ship lower-spec chips than the cutting edge currently rolling off US production lines.
While the decision reopens practically one of the most profitable markets in the computing world, the cost is far from negligible. For Nvidia, China has represented tens of billions of dollars in potential annual revenue. Under the agreement, the direct skim from sales will meaningfully compress profit margins, effectively operating as an unconventional levy.
Washington frames the move as a balancing act that is preserving American firms’ ability to grow market share, while maintaining oversight on the flow of advanced semiconductors, and at the same time creating a direct revenue stream for the state.
Yet, the approach raises broader questions. Even under these constraints, the entry of such chips into China could accelerate the country’s AI and computing capabilities, albeit at a step below the Blackwell-class performance tier, narrowing the technological gap with the US over the medium term.
From a broader lens, this is effectively a concession allowing Chinese buyers to continue purchasing US chips within a second-tier performance bracket, while ring-fencing the most advanced designs for the time being. It also signals that China has crossed the competitive bridge, leveraging its domestic resources and, perhaps, indirect external inputs, to become the world’s second largest player in the sector. US policymakers now appear to be betting that maximizing collected sales tax from Chinese sales can fund and accelerate America’s push further and further into the true first tier of semiconductor technology. Whether this unorthodox way of doing business pays off will likely become clear only over the next year or longer.
In short, we are seeing a shift in AI global trade from market competition to a contested arena where geopolitical objectives and financial engineering converge. It is difficult to see the delayed announcement or the potential renewal of broader US-China technology agreements as unrelated to these complexities.