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Don Kaufman here. |
Nvidia just agreed to pay 15% on H20 chips shipped to China. Jensen bent the knee, Wall Street cheered the revenue potential, and I'm sitting here with one simple question: Who exactly gets that check? |
I'm serious. Is it a tax? Then it goes to the IRS. Is it a tariff? That should go to customs. |
But they're calling it a "licensing fee" - and that raises more red flags than a Soviet parade. |
The product never touches American soil, yet we're taking our cut. |
Here's what we know: Nvidia designs the chip, Taiwan Semiconductor manufactures it, and somehow the U.S. government gets to skim 15% when it ships to China. I've got questions. |
The $7 Billion Nobody's Talking About |
Wall Street's celebrating because Nvidia could have booked $7 billion more in revenue last quarter if they'd been allowed to sell these chips. |
That's over a billion in "licensing fees" the government would've collected. Not bad for a joint venture nobody voted for. |
But here's where it gets interesting: Everyone kept telling us chip margins are razor-thin. |
That's why companies have to manufacture overseas, that's why everything's so price-sensitive. Apparently margins aren't that tight if there's 15% sitting around to hand over to Uncle Sam. |
Jensen already bent the knee - just like Tim Cook did with his gold-plated gorilla glass peace offering. |
Now Intel's CEO is making the same trip to Washington, hat in hand. These aren't business meetings. These are tribute collections. |
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The Precedent That Should Terrify You |
We used to have tax structures that encouraged reinvestment. 1031 exchanges, real estate depreciation - policies designed to keep capital working. |
Now we've got a new model: If you want to do business globally, the federal government gets a piece. |
Where does this stop? You're selling a product manufactured in Taiwan by a U.S. company to Chinese customers. The logical question is: What gives us the right to tax a transaction that never involves U.S. territory? |
But logic isn't driving this train. Control is. |
I keep thinking about those seven 747s Apple loaded with iPhones right before the tariffs hit - billions of dollars of inventory flying across the Pacific to beat the deadline. |
Now companies don't even get that option. The fee gets collected regardless of geography. |
Which is why it's essential you pay attention to institutional order flow. |
The Questions Nobody's Asking |
In the old Soviet Union, you didn't pay bribes - you bought papers, you purchased licenses. Same result, different paperwork. |
If this is really just a "licensing fee" and not a tax, who issues the license? |
What department processes the payment? What legal framework authorizes the collection? |
Because if it's not going through normal tax channels, if it's not following tariff procedures, then what exactly are we calling this? |
The scariest part isn't the 15%. It's that nobody's demanding answers to basic questions about authority and process. |
We're just accepting that if you want to play in global markets, the U.S. government gets a cut of transactions that have nothing to do with U.S. territory. |
What This Means Going Forward |
Don't get distracted by the revenue celebration. Yes, $7 billion in sales is good for Nvidia's top line. But this precedent changes everything. |
Any tech company with global operations now has a new cost structure to consider. |
Any international transaction becomes subject to arbitrary government participation. The rules just changed, and most investors haven't figured out the implications yet. |
Watch which CEOs make the pilgrimage to Washington next. |
Or better yet, watch where the big option players are moving into. |
Because once you establish the precedent that geographical reality doesn't matter for tax collection, you've opened a door that doesn't close. |
The market's treating this like a one-off revenue opportunity. I'm treating it like the opening shot in a much bigger campaign. |
And I'm still waiting for someone to tell me where that check actually goes. |
To your success, |
Don Kaufman |
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