President Trump said this week that Nvidia would be allowed to sell its advanced H200 chips to China, despite concerns that doing so will erode America’s competitive advantage in the artificial intelligence race. But he wants the federal government to get a 25 percent cut of the proceeds.How big might the windfall be? Niko Gallogly digs into the math.
The hype could exceed the payoff. Analysts at Wells Fargo estimate that lifting export controls to China for Nvidia’s H200 chips could result in $25 billion to $30 billion annual revenue, or $5 billion to $7.5 billion in annual revenue for the U.S. government. Nvidia had $57 billion of revenue in its most recent quarter.
But even if Nvidia were to capture 100 percent of the Chinese A.I. chip market, which the semiconductor giant estimates to be worth $50 billion, that would only result in $12.5 billion for U.S. taxpayers. Compare that with the $4.9 trillion in annual tax revenue collected in the U.S. last year.
Some analysts are skeptical about projecting significant sales.
“It remains unclear whether there will be actual orders for these older G.P.U.s,” Sebastien Naji, a research analyst at William Blair, wrote in an analyst note on Monday, referring to the Nvidia chips. He added that the firm would not update its Nvidia revenue expectations based on the news.That said, Alibaba and ByteDance have shown interest in buying H200s if Beijing clears such sales, according to Reuters.
Export volumes could be squeezed by both governments.
The U.S. Bureau of Industry and Security, which is responsible for granting export licenses, might take a restrictive approach to H200 approvals. And Beijing has pressured Chinese tech companies to use domestically made chips instead of American ones.
Still, a recent report from the Institute for Progress, a nonpartisan research organization, noted that “Chinese A.I. companies will remain highly incentivized to purchase significant volumes” of advanced semiconductors like H200s “for which China has no competitor and has imposed no restrictions.”
There is a legal elephant in the room. It is generally illegal to charge fees for export licenses, according to U.S. trade law, which states that “no fee may be charged in connection with the submission, processing, or consideration of any application for a license.
”That’s unlikely to deter Trump. “You could see Trump saying, ‘Jensen you owe us 25 percent’” which might result in a “voluntary” 25 percent donation to the Treasury Department from Nvidia, Andrew Grotto, a researcher at the Center for International Security and Cooperation at Stanford, told DealBook. (“Jensen” is Jensen Huang, Nvidia’s C.E.O.) But that move could expose Nvidia to shareholder lawsuits.
“Creative lawyers on his team may have some theory cooked up,” Grotto said of Trump’s legal team. “Whatever that theory is, it is certainly not obvious to me.”
-The New York Times