Nvidia and AMD are set to receive export licenses from the US government to sell AI chips in China, with a 15% revenue payment agreement. The unprecedented deal reflects the evolving semiconductor regulations. Tariffs on semiconductors in the US could rise to 100%, prompting manufacturers to expand production domestically. More such deals are expected.

Morningstar maintains Nvidia’s fair value estimate at $170 with a Very High Uncertainty Rating due to AI’s uncertain future and changing global regulatory landscape. The 15% payment could be seen as a tax on AI chip sales into China, impacting gross margin dollars. The structure and legality of such payments are still uncertain.

Nvidia is projected to sell $30 billion of AI chips in China by fiscal 2027, with a 15% tax potentially reducing net income estimates by 4%. The tax is unlikely to hinder sales or China’s AI adoption. China previously accounted for 20% of Nvidia’s data center revenue, with the $30 billion estimate representing 16% of the data center revenue forecast for fiscal 2027. More details are expected during Nvidia’s earnings report on Aug. 27.

Read more at Morningstar: US Will Get a Piece of the Action in AI Chips Sold Into China