August 19, 2025 /SemiMedia/ — Nvidia and AMD have reportedly agreed to hand over 15% of their China chip sales revenue to the US government in exchange for semiconductor export license approvals under the Trump administration. Analysts say the arrangement marks a new “pay-to-participate” model for accessing the Chinese semiconductor market.

Market observers believe Nvidia has the pricing power to offset the levy by raising the price of its H20 chip by roughly 18%. While such an increase would lower margins for the product, the overall impact on profitability is expected to be limited.

Gene Munster, co-founder of Deepwater Asset Management, said in a research note that if Nvidia seeks to preserve its gross profit, the H20 margin could fall from 71% to around 60%. Assuming the H20 accounts for 15% of total revenue, the company’s overall gross margin would decline from 71% to about 69.3%.

Wall Street still expects Nvidia’s overall gross margin to remain strong at about 71% in 2026. Analysts argue that despite some compression in product margins, Nvidia’s dominant position in high-performance AI semiconductors ensures it remains well-positioned in the global supply chain.