Nvidia and AMD may need to allocate 15% of their China chip sale revenues to the US government, according to a report from the Financial Times. Other news sources have been unable to verify this information independently.
US equity index futures will open at 6pm Eastern time, and sales to China might impact these stocks. The potential new payments could have adverse effects on the companies’ financial standings.
Impact On Market Volatility
Given the unconfirmed nature of this report, we are seeing a direct impact on expected market volatility. This uncertainty is a clear signal for traders to consider strategies that profit from price movement, regardless of direction. Buying straddles or strangles on Nvidia and AMD could be a primary response in the coming days.
The stakes are high, as a 15% levy would significantly impact earnings for both companies. In the second quarter of 2025, filings showed that China accounted for roughly 19% of Nvidia’s data center revenue and 22% of AMD’s total sales. This news puts a large, quantifiable risk on two of the market’s most important stocks.
We can already see the options market reacting to this potential instability. Implied volatility on both Nvidia and AMD weekly options has jumped over 25% based on overnight trading indications. This suggests traders are pricing in a much larger than average price swing before the week is out.
Strategies For Traders
For those who believe the reports will be confirmed, purchasing put options or establishing bear put spreads offers a way to profit from a potential sharp decline. A direct hit to a fifth of their revenue stream would almost certainly push these stocks below their recent support levels. We saw a similar situation in early 2024 with export restrictions, which caused a temporary 10% drop in AMD before the details were clarified.
Conversely, if one believes this is a baseless rumor that will be denied, buying call options is the logical play. A swift and official denial from the companies or the US government would likely trigger a relief rally. This would punish short-sellers and reward those positioned for a quick bounce back.
Ultimately, this situation creates a binary event where the outcome is not yet known. Traders should be prepared for sharp movements once US markets open and officials begin to comment. Until there is confirmation, expect heightened premiums on options for both companies.
