Why the market is shrugging off Nvidia's 15% fee on AI chip sales to China

CNBC

3 days ago

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market update: Stocks are little changed to start the week. There was an attempt at a rally shortly before noon, but it ultimately fizzled out. Investors may be waiting for the results of the July consumer price index report, which economics expect will show a slight pickup in inflation from June. Those numbers are due on Tuesday. Compared to recent weeks, earnings won't be as much of a catalyst for the markets with only a small handful of stocks in the S & P 500 scheduled to report. Nvidia deal : The market doesn't mind that Club name Nvidia and peer AMD will have to give the United States a 15% share of all AI chip sales to China. The arrangement, confirmed by President Donald Trump on Monday, is part of a broader deal announced last month that restored the companies' ability to sell AI chips to Chinese customers. That ability had been revoked in April, when the Trump administration tightened Biden-era export controls that had forced Nvidia and AMD to design throttled-back versions of their top-end AI chips for the Chinese market. This 15% payment to the government in order to be able to sell to China again is a first; we haven't seen a deal like this before. But it's not negative as far as the stock is concerned — shares were little changed on Monday. The bigger prize is maintaining the ability to sell to China, a market that Nvidia CEO Jensen Huang has estimated could be worth $50 billion in the next few years. Bernstein analyst Stacy Rasgon was on CNBC on Monday afternoon and shared this thinking on this deal. "From Nvidia's standpoint and from AMD's standpoint, I get it, like 85 cents is better than anything, and it's important for them to be able to sell into China because otherwise you're just handing that market over to China and to the local players. That market is not going away. We need to be able to compete there, so that's good," Rasgon said on "The Exchange." He added, "I think that should happen on their own merits." To size up the potential impact of this payment, Nvidia was selling about $8 billion worth of chips to China a quarter prior to the previous export restriction. A 15% haircut would equate to a little more than $1 billion per quarter, or about $5 billion per year. That's a large number for most companies, but not for Nvidia: analysts estimate the company will do about $200 billion in revenue over its ongoing fiscal year 2026 and $255 billion in fiscal year 2027. Up next: There are no major earnings reports on our radar after the closing bell on Monday and before the opening bell on Tuesday. But some notable names scheduled to report are Cardinal Health , Oklo , AST SpaceMobile , and Circle Internet Group . On the data side, on Tuesday we'll see the NFIB small business optimism index and the July consumer price index report. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.