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Analysts at Bernstein don’t like the precedent apparently being set by a reported deal for Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) to hand over 15% of revenues from Chinese AI chips sales to the U.S. government in exchange for export licenses, but concede that “85% is better than 0%.”
Analysts led by Stacy Rasgon believe it is better to allow Nvidia and AMD to sell AI into China, as failure to do so effectively hands the Chinese AI market over to Huawei and encourages the joining of Chinese developers around Huawei’s architecture and ecosystem. Noting that it is undesirable.
“Hence, even with a haircut we suppose 85% is better than zero%, and we’ll take it. That being said, we aren’t sure we like the precedent this sets (will it stop with Chinese AI? Will it stop with controlled products? Will other companies be required to pay to sell into the region? It feels like a slippery slope to us…),” said Rasgon and his team.
The analysts added that they are not sure what the purpose is, as it may raise some money, but does not seem to address any strategic issues.
The analysts noted that it seems probable that the companies could pass on the cost, particularly Nvidia, which has strong demand for its products, an order of magnitude higher than AMD.
Rasgon and his team said that Nvidia is developing new products for China, supposedly compliant with existing thresholds (and thus not requiring export licenses) based on their Blackwell architecture, and appears to think demand will move there (and away from Hopper) over time.
“The news stories we saw seemed to specifically name H20 (and AMD’s MI308) with the 15% seemingly part of a deal to approve export licenses. Hence, it seems plausible that newer (compliant) Blackwell products might not be affected,” the analysts added.