Insights 
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Nvidia has warned of potential litigation if the US government seeks to claim a percentage of its revenue. The US government has not yet established regulations mandating a 15% revenue share from licensed H20 sales.
Government officials have communicated their expectation to receive this percentage. Any move to claim a portion of revenue could lead to legal action from Nvidia.
If geopolitical issues are resolved, Nvidia expects to generate $2 billion to $5 billion in H20 revenue in the third quarter with more orders. The company anticipates a dramatic increase in AI infrastructure spending, estimated to reach $3 to $4 trillion by the decade’s end.
The emergence of an industrial revolution is expected to transform various industries. This transition presents long-term growth prospects for Nvidia, particularly in AI infrastructure.
The dispute over a potential 15% revenue share on licensed chip sales introduces significant near-term volatility for Nvidia. This headline risk, stemming from the threat of litigation against the US government, creates uncertainty that derivative traders can capitalize on. We expect implied volatility to remain elevated in the coming weeks as the market awaits clarity.
Traders should consider strategies that profit from large price swings, such as long straddles or strangles, with expirations in the next 30 to 60 days. The Nasdaq 100 Volatility Index (VXN) has already climbed over 15% in the past month to 29.5, reflecting sector-wide anxiety that is particularly acute for NVDA. These positions will pay off whether the government formalizes the rule, causing a drop, or backs down, triggering a relief rally.
For those with a bearish bias, buying puts offers a direct hedge against the possibility that the government codifies its revenue expectation. A 15% levy would directly impact earnings from the high-demand H20 chip, which analysts were expecting to contribute significantly to growth. Looking back, we saw similar single-stock shocks when the US government expanded export controls in October 2023, causing a sharp but temporary dip.
Conversely, the long-term outlook points to a major AI infrastructure buildout, with spending projected to hit trillions by the end of the decade. Recent data from market intelligence firm IDC projects a 28% compound annual growth rate for AI-related server spending through 2028. Therefore, a politically driven sell-off could be an opportunity for bullish traders to sell cash-secured puts at lower strike prices, collecting rich premiums while setting a favorable entry point for a long position.
The underlying business narrative suggests we are in the early stages of an industrial revolution powered by AI. Historical precedent, such as the initial skepticism surrounding the internet boom in the late 1990s, shows that transformative technology trends often overcome regulatory hurdles. The key will be to separate the immediate political noise from the long-term structural growth story.
