Nvidia (NASDAQ: NVDA) stock gained 2.3% in after-hours trading on Monday, following President Donald Trump's reportedly posting on Truth Social that the U.S. government will allow Nvidia to export its new H200 artificial intelligence (AI) chips to select customers in China. Nvidia will have to pay the government 25% of its revenue derived from the sales of these chips to Chinese customers.
Trump reportedly stated that the same deal allowing AI chip exports to China would also apply to Nvidia's rivals, such as Advanced Micro Devices (AMD) and Intel.
Granted, 25% is a hefty cut, but Nvidia boasts large profit margins, so it should be able to pay such a cut while still generating a significant profit on these chips.
And certainly for investors, some profit generated from sales of data center AI chips to China is better than no sales of data center AI chips to China.
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The H200 is Nvidia's new data center AI chip for the Chinese market
The H200 is Nvidia's new data center AI chip for the Chinese market. It's more powerful than the H20 chip, which was Nvidia's prior chip specifically for China. However, it's not as powerful as Nvidia's graphics processing units (GPUs) based on its Blackwell architecture, which are its current data center AI chips for U.S. customers and customers in allied nations.
Earlier this year, the U.S. government enacted export controls on H2O, essentially restricting Nvidia from selling it to China. The government cited national security reasons. Then, in August, there was an about-face when the Trump administration announced that it would begin issuing licenses for Nvidia to sell its H20 chip to select Chinese customers, and that Nvidia would give the government a 15% cut of the revenue derived from these sales.
However, according to reports, the Chinese government instructed Chinese companies not to buy Nvidia's H20 chip. So, Nvidia has had very little to no sales of the H20 for the last couple of quarters.
It remains to be seen whether the Chinese government will take similar actions regarding the H200. However, I don't think this will be the case because the H200 is notably more powerful than the H20 and reportedly more powerful than the AI chips made by Chinese companies. In other words, the H200 chips should be hard for China to pass up.
NASDAQ: NVDA
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Good news for Nvidia and its investors
Early reports on this H200 news indicate that Trump's decision is controversial, as some individuals have concerns about China gaining access to these more powerful AI chips.
Nonetheless, for Nvidia and investors in Nvidia stock, this H200 news is good news. Nvidia should see a boost in revenue and profits in future quarterly reports, assuming the Chinese government doesn't instruct Chinese companies to refrain from buying the H200 chip.
