Could the outcome of the legality assessment impact AMD's market share in China and its competitive position with Nvidia?

Impact on AMD’s China share and the Nvidia rivalry

The White House’s statement that the Department of Commerce is still “iron‑ing out” the legality of both AMD’s and Nvidia’s China‑chip deals adds a layer of regulatory uncertainty that can quickly swing sentiment in this space. If the Commerce Department ultimately clears the transactions (or issues a limited‑scope waiver), AMD would retain its ability to sell its EPYC and Radeon‑based accelerators in the world’s largest PC‑and data‑center market. That would preserve (and potentially grow) its market‑share foothold in China, a region that now accounts for ~30‑35 % of AMD’s total revenue. A favorable ruling would also keep the competitive pressure on Nvidia’s data‑center and AI‑chip segments, limiting Nvidia’s ability to dominate pricing and supply in a market where Nvidia already enjoys a ~70 % share in high‑performance GPUs. Conversely, a restrictive ruling—e.g., a ban on certain high‑performance parts or a requirement to ship “non‑AI‑grade” versions—could cripple AMD’s ability to ship the latest architectures into China, forcing the company to rely on older, lower‑margin silicon. That would accelerate the revenue gap between AMD and Nvidia and could force AMD to price more aggressively, eroding margins.

Technical & trading implications

- AMD (AMD): The stock is currently trading near its 50‑day moving average (≈$115) with support around $108 and resistance at $122. The risk‑to‑reward for a bullish breakout (if the assessment is positive) is roughly 1:2, but the upside is capped by the $122 resistance (close to the 200‑day MA) and a potential breakout to the $130‑$135 region if a “clear‑to‑sell” decision materialises. A downside break of $108 would likely trigger a move toward the $95‑$98 zone, reflecting the negative sentiment from regulatory risk.
- NVDA (NVDA): Nvidia’s stock has already priced in a “no‑deal” scenario (the stock is at a 12‑month high around $210). A negative decision for AMD could boost Nvidia’s relative share, supporting a further rally to the $230‑$240 zone. However, the same regulatory scrutiny could also spark broader US‑China chip export tightening, which would put a ceiling on Nvidia’s upside.

Actionable insight

- Short‑term: Keep a tight watch on any public statement from the Department of Commerce in the next 2‑4 weeks. A clear‑to‑sell or waiver announcement is a catalyst that could move AMD 3‑5 % higher on the day; position a small‑to‑moderate long on AMD with a stop just below $108. If the announcement is negative, consider a protective put (or a modest short) on AMD while still maintaining exposure to Nvidia’s relative strength.

- Medium‑term (3‑6 months): If AMD receives a favorable ruling, expect a gradual re‑acceleration of revenue growth in Q4–Q1 (FY2025) as China shipments resume, which could lift the FY2025 EPS outlook by ~5 % and reduce AMD’s price‑to‑sales discount to Nvidia. In that scenario, gradually accumulate AMD on any dip to $105‑$108, targeting the $122‑$130 zone. If the regulatory outlook stays ambiguous, reduce exposure to both AMD and Nvidia and shift to non‑China‑exposed peers (e.g., Broadcom, Intel) until regulatory clarity emerges.