Cramer: government Intervention in Chip Industry a ‘Good Deal’ for Taxpayers,Nvidia & AMD

NEW YORK – CNBC’s Jim Cramer defended the Biden management’s recent decision to allow chip sales to China,despite a mandate requiring chipmakers like Nvidia and AMD to share 15% of their revenue. Speaking on his show “Mad Money,” cramer argued the deal is ultimately beneficial for both taxpayers and the companies involved.

“Wring your hands all you want, but this chip deal is good for the taxpayer and good for Nvidia and AMD,” Cramer stated. He questioned the need for criticism, pointing out that if the chipmakers themselves aren’t voicing concerns, there’s little reason for others to do so.

this isn’t the first time the U.S. government has stepped in to support key industries. Cramer highlighted ancient examples, including the 1979 bailout of Chrysler during a bankruptcy crisis and the 2008 financial crisis interventions with major banks. Notably,in both instances,the government ultimately profited from its investments.

“The Trump Administration intervened where it shouldn’t have, and then it changed course to do the right thing,” Cramer added, suggesting a pragmatic approach to government involvement in business.

Beyond the Headlines: The Evolving Role of Government in Business

The debate surrounding the chip deal underscores a long-standing tension: the appropriate level of government intervention in the private sector. While often viewed with skepticism, government involvement isn’t always detrimental.

Historically, federal interventions have ranged from antitrust enforcement – breaking up monopolies to foster competition – to direct investment during times of economic crisis.These actions are often justified on grounds of national security, economic stability, or promoting innovation.The Chrysler bailout, for example, prevented the collapse of a major American automaker and saved countless jobs. Similarly, the bank bailouts during the Great Recession aimed to prevent a complete financial meltdown. Though, such interventions also carry risks, including potential market distortions and moral hazard – the idea that companies may take on excessive risk knowing they’ll be bailed out if things go wrong.The current chip deal represents a nuanced approach. The revenue-sharing component aims to bolster domestic chip manufacturing, a critical area for national security and technological leadership. By allowing sales to China, the deal also avoids potentially crippling key American companies and disrupting the global supply chain.

Looking Ahead:

The semiconductor industry is poised for continued growth, driven by demand for artificial intelligence, electric vehicles, and other emerging technologies. Government policy will play a crucial role in shaping this future. The balance between fostering innovation, protecting national interests, and maintaining a competitive market will be a key challenge for policymakers in the years to come. Investors should closely monitor these developments, as they have the potential to significantly impact the performance of companies in the semiconductor sector and beyond.

How might the strengthened export controls impact the long-term competitive landscape between US and Chinese companies in the AI sector?

Revisiting Old Ground: Analyzing the Implications of Trump’s Deal with Nvidia and AMD

The Core of the Agreement: Export Controls and Geopolitical Strategy

The recent agreement between the US and the EU, impacting technology exports – including those from Nvidia and AMD – isn’t a new development, but a recalibration of existing export controls. Initially implemented under the Trump management, thes controls aimed to limit China’s access to advanced semiconductors and the technologies used to create them. The focus was, and remains, on preventing the chinese military from benefiting from US technology. This directly impacts Nvidia’s high-end GPUs, crucial for AI development, and AMD’s processors used in supercomputing and other sensitive applications.

Key Restrictions: The original restrictions targeted chips with specific performance capabilities, effectively creating a tiered system of export licensing.

EU alignment: The new agreement with the EU strengthens these controls, extending their reach and ensuring broader compliance. This is notably significant given the EU’s role in semiconductor manufacturing equipment.

Geopolitical Context: This isn’t solely about technology; it’s a strategic move in the ongoing US-China tech war. The US aims to maintain its technological lead and limit China’s advancements in areas like artificial intelligence and high-performance computing.

H100 and A100 GPUs: The most powerful GPUs, like the H100 and A100, are subject to stringent licensing requirements, making sales to Chinese entities extremely challenging.

Diversification Efforts: Nvidia is actively working to diversify its customer base and develop option products specifically for the Chinese market that comply with export regulations.

Potential Revenue Loss: Analysts estimate that the export controls could result in billions of dollars in lost revenue for Nvidia over the next few years.

AMD’s Exposure

AMD, while also affected, has a slightly different exposure. Its product portfolio is more diversified,and its reliance on the Chinese market isn’t as pronounced as Nvidia’s.

MI300 Series: AMD’s MI300 series of GPUs, designed for AI and HPC, are also subject to export controls, though the impact appears less severe than on Nvidia’s top-tier products.

CPU Market Share: AMD has been gaining market share in the CPU market,and this segment is less directly impacted by the current restrictions.

Long-term Strategy: AMD is focusing on expanding its presence in other markets, such as data centers and embedded systems, to mitigate the risks associated with the export controls.

Reduced Dependency: The EU views this agreement as a way to reduce its dependence on both the US and China, particularly in critical technologies.

Preparing for Future Conflicts: The agreement is seen as a proactive measure to prepare for potential future trade conflicts, especially with a possible return of Trump to power.

Strengthened Alliances: It reinforces the transatlantic alliance and signals a united front against perceived economic coercion from China.

Beyond Semiconductors: Broader Implications for the Tech Industry

The implications extend beyond Nvidia and AMD. The agreement sets a precedent for increased scrutiny of technology exports and a more assertive approach to national security concerns.

AI Development: Restrictions on advanced chips could slow down AI development in China, potentially widening the gap between the US and China in this critical field.

Supply Chain Resilience: The agreement highlights the importance of building resilient supply chains and reducing reliance on single sources for critical components.

Global Trade Tensions: The ongoing tech war between the US and China is highly likely to intensify, leading to further trade tensions and potential disruptions to the global economy.

1. Compliance Programs: Implement robust export compliance programs to ensure adherence to all applicable regulations.
2. due Diligence: Conduct thorough due diligence on customers and end-users to identify potential red flags.
3. Licensing Expertise: Develop in-house expertise in export licensing or engage external consultants to assist with the application process.
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