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Analysts at BofA maintained their Buy ratings on Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) following a reported deal between the companies to give 15% of revenues from Chinese AI chips sales to the U.S. government in exchange for export licenses.
Analysts led by Vivek Arya said that, as per reports, in return for a 15% penalty, the U.S. government is willing to let Nvidia/AMD ship specific AI chips (H20/MI308) to China. “We see this as an incremental positive” because — Nvidia/AMD likely have enough pricing power to offset some part of the 15% penalty; the companies can use some part of their prior written-off inventory so even with 15% penalty they get some gross profit recovery; and China resumption maintains the original goal of engaging with an important (China) AI ecosystem and of potentially keeping competitors (Huawei) in check.
However, the analysts noted that they would not yet count on China being a source of durable upside because — it is not clear if the U.S. government will continue to provide approvals next year; restarting supply chains to produce more AI chips could take eight to nine months leaving a China hole in the first half of 2026; and rapidly evolving AI landscape could decrease the demand from certain China customers.
“We leave our NVDA, AMD estimates unchanged, but industry discussions suggest the companies will likely at-least try to recoup their recent write-off amounts ($4.5bn for NVDA, $800mn for AMD) even if they have to pay 15% penalties to the USG [U.S. government],” said Arya and his team.
On Monday, analysts at Bernstein said they don’t like the precedent apparently being set by the reported deal but conceded that “85% is better than 0%.”
Intel (NASDAQ:INTC)
BofA kept its Neutral rating on Intel.
The analysts said that there is a spotlight on Intel’s management and there is a chance for the company “to showcase its (long-term) strategic importance to tech ecosystem, though meeting likely has no bearing on the company’s (tough) competitive positioning or manufacturing expertise.”
On Monday, U.S. President Donald Trump said Intel CEO Lip-Bu Tan’s success story is “amazing” less than a week after he called for his resignation.
“We make no comment on personnel matters but believe they detract from INTC’s corechallenges that not yet been rectified,” noted Arya and his team.
The analysts pointed to — no independent validation/support for Intel’s 18A (or 14A) manufacturing, despite the need to have leading-edge foundry options; lack of AI strategy; constant restructuring turmoil; and tough competition against AMD and ARM-variants in what is likely an ex-growth x86 PC/server Central Processing Unit, or CPU, market.
“INTC’s low valuation, restructuring potential and scarcity value underlie our Neutral rating, but until core challenges are addressed it’s hard to see a durable rebound regardless of management related headlines, in our opinion,” said the analysts.