Nvidia (NVDA) Keeps China Market Access at a Cost, Wedbush Calls It a Smart Trade-Off

Nvidia Corporation (NASDAQ:NVDA) is one of the best big tech stocks to buy right now. The company again came under the radar after the Trump administration asked it to pay 15% sales tax on certain semiconductors it sells to China. However, the impact appears to be quite manageable for the company.

Wedbush Securities’ Daniel Ives and his team believe the decision allowing Nvidia and AMD to sell certain AI chips in China removes a major obstacle for sector growth. Under the arrangement, Nvidia will pay 15% of revenue from its H20 AI chips and AMD will do the same for its MI308 chips. While the imposition raises legal and policy scrutiny, Ives sees it as a meaningful growth driver not just for these companies but for the U.S. tech sector more broadly.

As per a Bloomberg report, considering the company’s $5 billion quarterly relevant sales exposure to China, Nvidia might end up paying $700 million per quarter. This would barely hurt the company, which generates $20 billion in quarterly profit.

Ives notes that if the previous blockade on Nvidia’s H20 chip had remained, it could have created a $15 billion annual opportunity for Huawei, strengthening China’s AI position and constraining U.S. firms. The current approach, he argues, strikes a balance between protecting national security and fostering American innovation.

Ives frames the situation as part of an “AI arms race” between the U.S. and China, crediting the administration for ensuring U.S. tech players remain competitive globally. He underscores that Nvidia’s role as the supplier of the core AI chip worldwide gives it a unique edge, and paying 15% to maintain access to China and other strategic markets is, in his words, a small trade-off for the potential upside.

Nvidia Corp. (NASDAQ:NVDA) designs and manufactures graphics processing units (GPUs), system-on-a-chip units (SoCs), and AI hardware and software.

While we acknowledge the potential of NVDA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.