U.S. authorities receive a 15% cut of the chip sales destined for China.
The U.S. government has reached an unprecedented agreement with Nvidia and AMD, requiring the companies to pay 15% of their revenue from AI chip sales to China to the Commerce Department in exchange for export licenses allowing those sales.
The deal, negotiated in early August 2025, involves a meeting between Nvidia CEO Jensen Huang and former President Trump, who initially sought a 20% cut before agreeing to 15% following negotiation.
This agreement reverses earlier export restrictions from April 2025 that blocked sales of these chips to China, reflecting a strategic pivot by the U.S. administration to balance national security concerns with the economic interests of domestic technology firms and the appeal of the Chinese market.
The revenue-sharing arrangement departs from traditional export control frameworks since it involves a financial stake for the U.S. government in sales to China. Experts have warned that this arrangement potentially undermines the rationale for export controls, as it sets a precedent of allowing high-tech exports in return for monetary compensation, rather than outright blocking sales for security reasons.
Under this deal, Nvidia will be able to sell its H20 AI accelerator chip, and AMD its MI308 chip, to Chinese customers. The U.S. government's decision to allow shipments of toned-down AI chips to China follows lobbying by Nvidia CEO Jensen Huang.
Nvidia argues that the U.S. government's restrictions on AI chip sales to China will push China to develop its own technologies. The company faced potential billion-dollar losses due to these restrictions, as it estimated it would have sold H20 chips worth over $20 billion to China this year before the U.S. blockade.
For AMD, current estimates for sales to China this year range from $3 to $5 billion. The U.S. government's policies could potentially lead to significant losses for American companies in the AI chip market, but could also create new global competitors for these firms.
Critically, this deal enables China to maintain access to advanced AI chip technology, supporting continued AI advancements there despite geopolitical technology rivalry and restrictions. While Chinese authorities reportedly discourage usage of Nvidia's H20 in sensitive government or security applications, the scarcity of equivalently capable domestic chips suggests strong demand remains, thus enabling continued AI development in China albeit with some restrictions.
The U.S. government's tightened rules for semiconductor sales to China earlier this year have been a subject of criticism, as they may encourage China to develop its own technologies. The U.S. government's policies could potentially create new global competitors for American companies in the AI chip market.
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- The unusually structured revenue-sharing agreement between Nvidia and AMD, and the U.S. government is a blend of technology, politics, and general-news, as it involves the export of advanced AI chips to China in exchange for a percentage of revenue, a departure from traditional export control frameworks.
- The implications of this deal, particularly its potential impact on national security, economic interests, and the development of global competitors, are subject to ongoing discussions in the realm of technology and politics, as experts warn it sets a precedent for allowing high-tech exports in return for monetary compensation.
