US equity index futures are set to open amidst notable news. Nvidia and AMD have reportedly agreed to provide the US government with 15% of revenue from chip sales in China.<\/p>\n
This decision allows them to obtain export licences for semiconductors in the Chinese market. The arrangement, negotiated with the Trump administration, received approval last week.<\/p>\n
The information comes from sources familiar with the matter, including a US official, as reported by the Financial Times.<\/p>\n
This news about Nvidia and AMD is a major negative catalyst for the technology sector. The 15% revenue levy on China sales will directly compress profit margins and force analysts to downgrade future earnings estimates. We expect an immediate and sharp gap down in both stocks, as well as the broader semiconductor ETF (SMH), when US markets open for the week.<\/p>\n
We believe the most direct response is to buy near-term put options on NVDA and AMD. This strategy profits directly from a fall in the underlying stock price. Given the surprise nature of this deal, we anticipate a powerful initial wave of selling that could last for several days.<\/p>\n
To put this in perspective, Nvidia\u2019s filings in early 2025 showed that the Greater China region accounted for 21% of its total revenue. A 15% tax on that portion represents a 3.15% hit to the company’s total global revenue, which flows straight to the bottom line. This makes its prior forward guidance, which helped propel the stock up over 80% year-to-date in 2025, seem incredibly optimistic now.<\/p>\n
Implied volatility will spike on this news, making options more expensive. An alternative strategy for us is to sell bear call spreads, which profit if the stock price goes down, sideways, or even slightly up. This approach also takes advantage of the elevated premiums and benefits from the eventual decline in volatility after the initial shock wears off.<\/p>\n
Looking back, we remember the market reaction when the first significant US chip export controls were enacted in October 2022. Semiconductor stocks sold off heavily for weeks as the market struggled to price in the geopolitical risk and uncertainty. This historical precedent suggests the negative reaction will be a sustained trend rather than a one-day event.<\/p>\n
Due to Nvidia’s significant weighting, this will almost certainly drag down the entire Nasdaq-100 index. Therefore, we are also considering buying puts on the QQQ ETF as a broader market hedge. This news could be the trigger for a larger market correction that many have been anticipating throughout the summer of 2025.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Nvidia and AMD to share 15% China chip sales revenue with US for export license access.<\/p>\n","protected":false},"author":62,"featured_media":16989,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-28684","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28684","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=28684"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/28684\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/16989"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=28684"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=28684"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=28684"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}