Nvidia, AMD to Pay US 15% of China Chip Sales in Trump Deal

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1:42India, AMD, these companies, chip companies, cutting a deal potentially with President Trump to pay 15 % on China AI chip sales in a deal with the U.S. government. And I can't recall seeing similar type deals before, but let's get the latest on this. Ed Ludlow, he covers all the technology stuff for Bloomberg. He's out there in London, but he's back home in London right now. Ed, thanks so much for joining us here. Can you break down kind of this deal for NVIDIA and AMD? How did this whole thing come about?

2:18Ed Ludlow:Yeah, I mean, it's an unprecedented arrangement if you consider it simply an export tax. You know, what we understand from sourcing is like this is a quid pro quo that export licenses for NVIDIA and AMD to be permitted to sell a specific chip that each of the companies had designed for the Chinese market, they will give up 15 % of future revenues. And the math's important. Historically, those numbers you were going over in the prior segment, 24 % for AMD, 13 % for NVIDIA, those are from the last fiscal year. And the state of play has been that NVIDIA and AMD have not been allowed to sell product directly into China.

3:00Ed Ludlow:They haven't done. NVIDIA is the only company that's commented on this reporting story. And they did so very purposefully, saying we have not yet shipped any of our so-called H20 chip. But the market, on one hand, sees this as really positive. They have been campaigning to be able to sell into China. And on the other hand, there's a cautionary tale because they'll pay a levy on it in the billions of dollars on a fiscal year basis. and China may have something to say about it. But this is all according to people familiar, of course. And what could this mean for NVIDIA and AMD pushing, I mean, even deeper into the Chinese market?

3:42Ed Ludlow:So NVIDIA in particular, Jensen Wang, the CEO, has been very consistent that it's important to have access to the Chinese market because 50 % of all of the research in the world that goes into AI is either being done in China or it's being done by a Chinese national. There is a deep research R &D development footprint. Call it what you will. And if you look at the sell side reaction this morning, the analysts all back Jensen on this line of argument that if you're not allowed to sell American technology into China, you're handing that market over to a domestic champion. In this case, it's Huawei.

4:22Ed Ludlow:And that's not a new warning. Jensen Huang has come on Bloomberg Television and made a very explicit warning on that. Behind closed doors, as we've reported, he's met with President Trump in the White House and discussed that. But before all of these restrictions came into place, the important bit was that China was a really big end market. And the policy of the current administration kind of took that away with immediate effect from, in NVIDIA's case, America's most important technology company. They would love to be getting back to booking billions of dollars of revenues on a fiscal quarter basis.

4:54Ed Ludlow:But the really key, they're not yet currently able to. This reporting around a deal that would allow them to is very interesting, but again, unprecedented. It seems like there's a thread here if you think about President Trump and his ability or willingness or need to generate revenue from some of our exports from the technology companies, whether it's a direct investment by Apple into U.S. manufacturing or these export type taxes here. Is this kind of a theme that's developing in Silicon Valley? The administration loves big round numbers, especially when it comes to investments by technology companies and into domestic operations.

5:35Ed Ludlow:The thing about this specific piece of reporting, 15 percent of China specific revenues, is you can model for it. You know, this pool, you know, better than anyone, the sell side must be having a field day this morning because they can start doing the math and they'll say, OK, in the most bullish scenario, NVIDIA might book seven billion dollars of revenue in fiscal 2Q 2026. Oh, my goodness. America is going to book one billion dollars of tax or one billion dollars of cost on that. And so, you know, the president is getting it done his way. But, you know, the question that we don't know and we don't have the reporting on it is whose idea was this?

6:14Ed Ludlow:The companies themselves or was it some deal making by the president? You'd expect that giving up 15 percent is better than having zero and they'd rather have that China market access. So how is China expected to react to all this? So in two different ways, there is the concern that is emerging out of China that having American technology come into the country in the form of a high performance GPU or an AI chip gives some security risk to China's national security because of the accusation that NVIDIA and AMD have engineered some sort of backdoor access into that technology. something that both companies dispute and refute unwaveringly.

6:58Ed Ludlow:So that's the first part. And then you go back to the domestic champion bit. You know, the H20 in NVIDIA's case and the MI308 in AMD's case were specifically engineered for the Chinese market to make compromises to both sides. They're very low performance chips relative to what is at the cutting edge for both of those companies. And Huawei is the leader in China, domestically speaking. It has chips that are better than those chips that our American companies have for export. So they also don't want to give up some of that momentum. And it will be interesting to see, because you guys probably will have seen what's going on with lithium and CATL in the markets this morning as well.

7:39Ed Ludlow:This has become a point of bargaining and negotiation between two countries. Technology going into China in exchange for raw materials going the other way. But there are pros and cons that each side's weighing up, and it's not a perfect swap right now. So we have any sense of timing here, Ed? This kind of came out of nowhere. When do you think this can be implemented? Yeah, it's a really great question. It did kind of come out of nowhere. And again, AMD have not commented publicly on this. NVIDIA put out a very purposeful and pointed statement. They don't address the 15 % at all. They're neither acknowledging it nor denying it.

8:16Ed Ludlow:But they do say we follow U.S. rules, which they say every single week at the moment. But there's a part in the statement that says we haven't shipped H20 to China for months, but we hope export control rules will let America compete in that market. So that makes it sound like they're saying just to Wall Street, don't model this into your top line assumptions just yet. But we think that we're getting closer for sure. Now, you mentioned timing. So, I mean, the U.S.-China trade truce, that's expected to expire tomorrow, correct? Yes. But again, you know, hey, guys, give me a break. I'm in London, usually San Francisco technology focused.

8:56Ed Ludlow:I ain't covering this White House necessarily. But the point is that semiconductors have had an ad hoc arrangement, haven't they? Not just in the context of China, but in other markets as well. India and electronics has been one. And what's so interesting about NVIDIA and AMD and semiconductors is that we have so much reporting about the rest of the technology sector, where American officials have been flying around the world saying to our trade partners, don't do business with China, except in the case of chips. So, you know, the deadlines, I think the president's talked about being extended in various cases anyway, but it is, pardon the pun, but that's where we stand.

9:36Ed Ludlow:AI chips are Trump's bargaining chip, right? And what he wants to achieve with China. So, Ed, when you talk to people in the Valley, are they just saying this is the new world order? We need to be open to cutting deals with this administration, again, whether it's a commitment to invest in the U.S. or paying a tax. Is this kind of the new world order, do you think? Yeah, it's a difference between the companies that are zigging with the president and those that are zagging against the president. Intel is a good example of that. The reporting is that Intel's CEO will be headed to the White House to get a good old-fashioned dressing down today.

10:16Ed Ludlow:Their strategy has not been in line with what's happening with NVIDIA and Apple, which is, we're committing, Mr. President. Here's hundreds of billions of dollars. Actually, those numbers are worth looking at with a microscope. They're a little bit sort of made up. But, you know, that that's kind of what corporate America's got on board with. But with the Huawei example really quick, as I look over my shoulder, see where the president's at. It's not just that if you don't sell American tech into China, they won't use it. They'll use Chinese tech. China wants to sell its tech into international markets as well.

10:47Ed Ludlow:And so, you know, the position of the Valley is flood the world with American technology and just drown out the competition wherever it comes from. Stay with us. More from Bloomberg Intelligence coming up After this. Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. This is the Bloomberg Tech Minute brought to you by ChatGPT.

11:19Now with ChatGPT work. I'm Carol Masser. DoorDash, the largest food delivery company in the US, is building its own delivery drones and has gained the necessary FAA approvals to operate them commercially, the latest in its effort to delegate more orders to robots as a way of cutting delivery times. Bloomberg's Natalie Lung reports the company says it has been conducting pilot programs with various restaurants, some of which have seen their order volume grow during the test period. The effort marks an expansion of DoorDash's in-house robotics efforts to reduce reliance on human couriers for some orders as their wages constitute a key expense to the business.

11:58Drones are also a way for DoorDash to cut delivery times on orders from more remote locations that some dashers may not want. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com today by selecting Work Mode. Available on Plus and Pro Plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment.

12:36It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right. So we've been hearing a lot about the impact of tariffs on big businesses, right?

13:14But small U.S. companies, they are really getting squeezed with President Trump's new levies. Here to break it down for us is Brendan Murray. He's Bloomberg Global Trade Editor. He's joining us from London. So thanks for joining us, Brendan. First off, I got to ask you, how much of a financial hit are we talking about? Well, the U.S. Chamber of Commerce recently put a number on this, and they're saying that there are about 236 ,000 small business importers in the U.S. Now, those are companies that have less than 500 employees. And they say that if you apply the amount that they import and you combine that with the tariff rate that they would be paying, they're looking at about$200 billion a year is the tariff bill for these small importers that have to pay these new tariffs that President Trump rolled out.

14:07So that works out to about almost$900 ,000 per company per year. So imagine if that bill suddenly arrived on your desk at your retail shop or other small business, and that oftentimes would wipe out any sort of profit margin you might have. So the small businesses are speaking to politicians in Washington through the National Retail Federation and the U.S. Chamber of Commerce and trying to have their voices heard, because all anybody can hear these days is the stock market is ignoring the trade war. But it certainly isn't. The trade war is certainly having an impact on these small companies that don't have the wherewithal to absorb the higher costs and the higher administrative duties that they're facing now.

15:04So, Brendan, we've seen we just finished up the second quarter or about to finish up the second quarter earnings period. And it seems like most of the companies, when they talk about tariffs, are saying, hey, we're eating it in our margin for the most part. Can small businesses do that? Not really, at least not in the long term. They are also trying to get creative with putting putting good. You know, a lot of them stockpiled up before the tariffs took effect. A lot of them are doing things like these bonded warehouses where you don't owe the tariff bill until later on. So there are there are ways to kind of put off the tariff payment that you're going to owe the government.

15:48but not forever. And eventually it's going to have to be passed on to the consumer. Maybe the exporter that you buy it from will cut you a little break. But between the exporters, the importers and the consumers, you know, this this this extra cost is just going to get distributed throughout the supply chain. Hey, Brendan, can you get a little bit into why why this is so important? Because small businesses are really the source of more than half the country's job creation, right? In recent years. Yeah, exactly. I mean, you know, Small businesses, they're not the ones we read about in headlines all the time, but they are the ones that are where lots of new jobs are being created.

16:30And we read a lot about the big publicly traded companies that lay off tens of thousands of workers. But we've got millions of small businesses that are hiring just a couple every day. And so it is a big constituency for economic activity that's often overlooked because we think of the American economy as being driven by, you know, S &P 500 companies when, in fact, it's the, you know, it's these companies with, you know, less than 50 employees often that are driving a lot of the employment and investment in, you know, in various, you know, regions across the country. So I think what I'm what I'm also hearing from and seeing in your reporting is just, I guess, the uncertainty.

17:17If you're I guess if you're a big Walmart or just a big corporation, Procter & Gamble, you probably got teams of people who can deal with all these changing tariffs. Small businesses, I'm guessing, don't have those resources. So I guess they're just left to fend for themselves. Yeah, pretty much. I mean, or they're calling up a customs broker or some expert. Imagine if you're filling out your taxes went from a one-pager to the IRS to 50 pages. You're going to probably need some help figuring that out if you want to do it right. You don't want to be audited later. So this is essentially what these companies, these small businesses are facing is all this extra administrative paperwork, electronic paperwork.

18:09But it's still, you know, you still have to fill out the forms correctly. Otherwise, the customs bureau is going to come is going to come at you and penalize you if you if you misclassify a good under one HS code. You know, when that that a tariff applies to that, when it doesn't. And so it can get really complicated, especially when, you know, 80 different countries have different tariff levels now. And then, you know, on top of that, you have the sectoral specific tariff, steel, aluminum, cars. It's coming on pharmaceuticals and chips. So it's just creating this real complex web of bureaucracy that small businesses just don't have the capacity to handle.

18:56Yeah. And what are some, especially being hit with those higher import costs? I mean, you gave some big figures earlier in the last 30 seconds or so. Can you explain, kind of break that into detail about where those costs are coming from? Yeah, I mean, basically, if you're an importer, you have to put up a customs, what's called a customs bond. And that is basically a guarantee. It's a type of insurance that the customs bureau is going to get paid down the road. And so it's a bit, it's sort of like cash in reserve. And now you suddenly have to put up about 20%, maybe 50 % more. And so that really kind of drains your, it comes right out of your cash flow, your working capital.

19:34And it, you know, can essentially, you know, paralyze your operation if you don't have that to draw on. So, yeah, so if you add all of these, you know, hundreds of thousands of incidents together, you know, what you wind up with is about half of new job creation created by these small businesses, you know, feeling the real pain from these new tariffs. Stay with us. More from Bloomberg Intelligence coming up after this.

20:30the company says it has been conducting pilot programs with various restaurants, some of which have seen their order volume grow during the test period. The effort marks an expansion of DoorDash's in-house robotics efforts to reduce reliance on human couriers for some orders, as their wages constitute a key expense to the business. Drones are also a way for DoorDash to cut delivery times on orders from more remote locations that some Dashers may not want. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com today by selecting work mode.

21:08Available on Plus and Pro Plans. Everyone's talking about how AI is transforming work, especially in sales. While the landscape shifts, one thing remains the same, the thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart.

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22:16You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Well, on the media front today, we had Paramount. It's actually called Paramount or Skydance because Skydance acquired Paramount, which used to be Viacom, which used to be. Forget about it. Anyway, so it's Paramount Skydance. they're buying the UFC rights for$7.7 billion, ultimate fighting championship. I'm not a fan, but I know there's gajillions of people out there that love that stuff.

22:55And they're paying a big penny for it. Let's see what it means for the company. Geetha Ranganathan joins us here. She covers all the big media companies. Geetha, does this make sense? Is this a good deal for Paramount? You know, Paul, it's really no one saw this coming. I mean, the Paramount Skydance transaction just closed last week, August 7th. And we were still kind of waiting for some inkling of what the go-to strategy or the go-forward strategy would be from, you know, David Ellison's team. And here you go with a bang, you know, paying almost$8 billion for UFC rights. Now, they are premier sports rights.

23:34So they're definitely making a big statement here. Yes, you're absolutely right. UFC has over 100 million fans in the United States. Their current deal is with ESPN. They were getting paid about 500 million a year. So this is, you know, more than 120 % surge. So it is definitely a pretty penny. And what Paramount is hoping is that this really gets them onto the sports arena, so makes them a must-have platform. And we're talking here about Paramount +, which is their streaming platform, which is known for really some great scripted content and some sports. But this is really a big way for them to kind of make a statement, make a really bold splash on the sports streaming stage.

24:14All right, Geetha, I'm trying to take this in stride because my husband is a big UFC fan. So he watches it on ESPN. So does this mean that I have to get Paramount Plus? Don't tell me that, Geetha. Sorry, Lisa. Yes, you do. Because everything, all of the UFC content. So what we initially thought was that UFC was kind of going to split these packages. They have the fight night, which is the weekly, bi-weekly kind of, you know, matchups that you see. And then they have their big marquee events, which are the numbered events with, you know, the likes of O 'Connor McGregor, all these other big superstar players.

24:50And you got to pay out of your pocket for that pay-per-view. They're actually now making all of that content, both the marquee events, as well as the fight nights, all available to Paramount Plus subscribers. So there's no pay-per-view anymore. But yeah, unfortunately, your husband's going to have to subscribe to Paramount Plus. Thanks, Geetha. This is what I think you do. I got to cut the cord. Every streamer you put on, you have to take one off. So go to the family. OK, we're putting on Paramount+. Oh, yes. What are you giving back to me? What are we giving back? Yeah, exactly. That's how you do it.

25:19Thank you. Geetha, the stock market doesn't care. The stock's off 1.2 % today. It's at a 52-week low. What is realistically the bull case for Paramount Skydance Corporation? Yes, I think we really need, of course, this kind of tells us that they're definitely going to keep the streaming platform. Some of the concerns, Paul, before the deal actually closed was what is Skydance really interested in? So they don't really have any expertise in running TV assets. All that they really cared about was the Paramount Studio, because Skydance is a big studio and they were really, really interested in the studio assets.

25:56So we really didn't have any direction in terms of what they were going to do with the cable networks. Viacom has a bunch of those. You have the CBS Broadcast Network. You have the Paramount Plus streaming platform. What this deal signals is they're definitely interested in the streaming platform and the CBS broadcast network because, you know, they did say that they're going to simulcast some of those UFC games on the CBS broadcast network. So I think that is going to be a core part of their portfolio. What we're still not clear about is what they're going to do with some of the cable networks.