AMD Shares Rise on Plan to Pay US Fee for China AI Chip Sales
CEO Lisa Su confirms the company will pay a 15% fee to resume shipments of its MI308 chips, signaling confidence in the high-stakes Chinese market.
Advanced Micro Devices Inc. (NASDAQ: AMD) saw its shares gain in trading Thursday after Chief Executive Lisa Su confirmed the company is prepared to pay a 15% fee to the U.S. government to resume selling its artificial intelligence chips to China.
The strategic decision signals a calculated move to re-engage with the lucrative Chinese market, even as geopolitical tensions and export restrictions create a complex operating environment for the semiconductor industry. AMD's stock was trading around $216 late Thursday, reflecting investor optimism that regaining access to China outweighs the significant cost of the fee.
Speaking at a Wired conference in San Francisco, Su stated that AMD would comply with the terms to ship its MI308 AI accelerators, a product designed to compete with offerings from rival Nvidia. "We are prepared to pay the 15% tax on our AI chip shipments to China," Su said, providing the first public confirmation of the company's commitment. The arrangement is part of a deal reportedly established by the Trump administration in August, which allows both AMD and Nvidia to sell certain regulated technologies to China in exchange for a percentage of the revenue.
This development is a critical pivot for AMD, which previously faced uncertainty over its China operations. The company's second-quarter earnings were met with a muted response from investors due to the lack of a clear forecast for its Chinese business, which prompted some analysts to lower price targets. Now, with an apparent path forward, the calculus has changed.
The decision underscores the immense value of the Chinese AI market, which chipmakers are reluctant to abandon despite Washington's efforts to curb Beijing's technological advancement. For AMD, with a market capitalization of over $354 billion, the potential revenue from China is substantial enough to justify absorbing the 15% tariff.
Analysts view the move as a pragmatic trade-off. Stacy Rasgon, an analyst at Bernstein, previously noted that while the fee could impact gross margins, "keeping 85% is better than zero percent." This sentiment has been echoed by others, with analysts at Susquehanna raising their price target for AMD to $210, anticipating the company could recover around $800 million in revenue in the second half of the year as shipments resume.
The competitive landscape remains fierce. The U.S. government's export controls have forced both AMD and Nvidia to develop specialized, lower-performance chips for the Chinese market to comply with regulations. However, even these efforts face political headwinds. In a related development, a group of U.S. senators is reportedly seeking to prevent Nvidia from selling its most advanced China-specific AI chips, highlighting the persistent scrutiny facing the sector.
AMD's agreement to pay the fee offers it a clearer, albeit more expensive, path to navigating these restrictions compared to its primary rival. The move is not without risk. Some legal experts have questioned the unusual nature of the fee, suggesting that a direct tax on exports could face constitutional challenges. Furthermore, Beijing is aggressively pursuing a strategy of technological self-reliance, which could diminish the long-term demand for foreign-made chips.
For now, investors appear to be rewarding AMD's decisiveness. The company is betting that the insatiable demand for AI computing power in one of the world's largest markets is a powerful enough catalyst to overcome both financial and political hurdles.