U.S. Government Secures Major Revenue Pact with Nvidia and AMD Regarding Chip Sales to China
In a move that signals a new era in U.S.-China tech relations, NVIDIA and AMD have agreed to share 15% of their revenue from AI chip sales to China with the U.S. government as a condition for receiving export licenses for those chips. This arrangement, which is highly unusual and may blur the lines between national security policy and economic strategy, has raised questions about legality, fairness, and long-term implications for global semiconductor trade.
The agreement, discussed following a meeting between NVIDIA CEO Jensen Huang and President Donald Trump, covers revenue from Nvidia's H20 chip, designed for artificial intelligence applications. The H20 chip was previously halted by the Commerce Department due to national security concerns.
Traditionally, export licenses did not involve government revenue-sharing or fees, so this sets a new and controversial precedent. The deal is framed as a strategic move to control China's access to advanced AI chips critical for next-generation weapon systems, combining export controls with a financial mechanism benefiting the U.S. government.
If sales return to previous levels under the 15% revenue-sharing arrangement, the U.S. government could collect hundreds of millions per quarter, according to analysts. For NVIDIA, this could mean a significant loss, as China remains a key market, accounting for 13% of total sales in the last fiscal year, amounting to approximately $17 billion in revenue.
The arrangement may clash with existing export control laws, which prohibit fees associated with export license applications. Critics argue it reflects crony capitalism, where political leverage is used to extract economic concessions from corporations.
However, NVIDIA has not confirmed the revenue-sharing arrangement directly. The company has only confirmed its commitment to compliance with U.S. government rules. Nvidia has not shipped H20 to China for months, raising questions about the impact of the agreement on its business operations.
AMD, another major player in the AI chip market, reported $6.2 billion in Chinese revenue in 2024, or 24% of its total. It's unclear whether AMD is also part of this revenue-sharing agreement.
The Financial Times reported that the revenue-sharing agreement could open the door for resuming exports, but the Trump administration has yet to clarify how the revenue will be allocated. Meanwhile, the tech industry watches closely, as this agreement sets a precedent that could reshape global semiconductor trade for years to come.
In a separate development, NVIDIA CEO Jensen Huang commended President Trump's AI agenda, expressing hope that export control rules will allow America to compete in China and worldwide. This optimism comes amidst reports of a Chinese national, allegedly an illegal immigrant, trying to steal sensitive AI microchips, according to the Department of Justice.
As these events unfold, the tech world awaits further clarification on the revenue-sharing agreement and its implications for the future of U.S.-China tech relations.
The revenue-sharing arrangement between NVIDIA and AMD for AI chip sales to China, which involves giving 15% of their revenue to the U.S. government, is a significant move that may impact global semiconductor markets, particularly for NVIDIA as China accounts for 13% of its total sales. Moreover, if AMD is also included in this agreement, it could mean a major shift in the AI chip market, given that AMD reported $6.2 billion in Chinese revenue in 2024.
