Semiconductors could benefit from paying 15% to U.S. for China AI chip sales – Wolfe’s Chris Caso

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Semiconductors can benefit from Trump’s 15% export tax, according to Chris Caso, Wolfe Research senior analyst.

The U.S. Commerce Department is working on legal details for President Trump’s proposed agreement [https://seekingalpha.com/news/4482960-nvidia-amd-to-pay-15-of-china-ai-chip-sales-to-the-us---report]with Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) and Advanced Micro Devices (AMD [https://seekingalpha.com/symbol/AMD]) to have them hand over 15% of revenues from their Chinese AI chip sales to the U.S. government in exchange for export licenses, with potential expansion to other companies.

Despite this, the semiconductor ETF (NASDAQ:SMH [https://seekingalpha.com/symbol/SMH]) has reached a record high, surpassing $300 and up more than 24% year-to-date.

During a CNBC interview, Caso suggested the tariff may benefit Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) more than AMD (AMD [https://seekingalpha.com/symbol/AMD]) due to margin differences. “AMD’s margins are lower. So…is AMD able to absorb that 15% in the same way Nvidia has?” Nvidia’s (NVDA [https://seekingalpha.com/symbol/NVDA]) higher margins put it in a better position to handle the additional costs, he said.

The analyst questioned whether the restrictions were truly about national security, given the administration’s willingness to allow sales with a tariff. “The premise behind the original restrictions on the H20, what Nvidia sells into China, is that the performance restrictions were such that what Nvidia could sell into China was equal to what China could do domestically on their own, largely through Huawei,” Caso said.

Nvidia’s (NVDA [https://seekingalpha.com/symbol/NVDA]) proprietary software CUDA provides a significant competitive advantage in China and globally.

“Chinese developers are still dependent on that,” he said. “The longer this drags out and China becomes more dependent on Huawei silicon, the less they’re going to use CUDA,” suggesting continued market access is strategically important for Nvidia beyond immediate revenue concerns.

In addition, Caso highlighted positive developments in the broader semiconductor sector (NASDAQ:SMH [https://seekingalpha.com/symbol/SMH]), including signs of recovery from a prolonged cyclical downturn.

“We’re starting to see some of the signs that [the cyclical downturn] is coming to an end,” he said, specifically mentioning Texas Instruments (TXN [https://seekingalpha.com/symbol/TXN]) and Micron (MU [https://seekingalpha.com/symbol/MU]) as companies positioned well for the future, with Micron’s HBM memory representing “the poor man’s way of playing AI.”

Nvidia (NVDA [https://seekingalpha.com/symbol/NVDA]) is down almost 0.9% on Wednesday after Reuters reported that the U.S. had secretly placed location tracking devices [https://seekingalpha.com/news/4484437-us-placing-trackers-in-ai-chip-shipments-to-prevent-diversion-to-china] in some targeted shipments of advanced chips at risk of being illegal diverted to China.

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