China has reportedly advised local companies to avoid using Nvidia’s H20 chips, especially for government-related tasks. Recent notices emphasize that these chips are considered “less advanced” by Chinese authorities. The effect on AMD’s MI308 chips is still unclear. The Trump administration had previously allowed both Nvidia and AMD to sell lower-end AI chips to China, with the U.S. government taking a 15% revenue share. This new guidance complicates that arrangement, especially if Chinese firms are told to follow Beijing’s advice against such purchases.

Uncertainty for Nvidia’s Revenue

The latest guidance from Beijing creates a lot of uncertainty for Nvidia’s revenue forecasts from China. We can expect increased volatility for NVDA options in the upcoming trading sessions. This means both put and call options are likely to get more expensive as the market anticipates a wider range of possible outcomes. For investors expecting a decline, buying put options on Nvidia is a straightforward strategy. With NVDA closing near $1,150 last week, we have already noticed increased trading volume for the September and October 2025 puts, especially at the $1,100 and $1,050 strike prices. This indicates that traders are bracing for a potential drop due to this geopolitical issue. The uncertainty surrounding AMD’s MI308 chips adds more complexity to the situation, but we expect negative sentiment to affect the stock. Traders may want to consider protective puts on the broader semiconductor sector, possibly using an ETF like SOXX as insurance against wider market effects. We saw a similar reaction across the sector after the Commerce Department’s new restrictions in late 2023.

Market Stability and Revenue Challenges

The market had started to factor in some stability due to the plan allowing lower-end chip sales, which was thought to help secure revenue. However, this guidance from Beijing directly contradicts that assumption and puts future earnings at risk. Recent customs data from July 2025 showed a 28% month-over-month drop in specialized semiconductor imports by Chinese companies, indicating that this cooling trend was already in motion. We need to keep an eye out for any official response from the current U.S. administration, as it could escalate the situation. The upcoming earnings calls for Nvidia and AMD will be crucial, as management will need to clarify their sales outlook for China. Any downward revision in guidance may lead to a significant decline in these stocks. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now