What just happened? For the first time, the US government will take a direct share of tech export revenue under a deal requiring Nvidia and AMD to give Washington 15% of sales from AI chips sold in China. This agreement marks an unprecedented approach in the oversight and regulation of sensitive technologies, making the US government a direct beneficiary of chip sales to the world's second-largest economy.
The unusual arrangement was set as a condition for securing export licenses needed to sell to Chinese customers, according to sources that spoke to the Financial Times. It encompasses the Nvidia H20 chip and AMD's MI308 chip, both crucial for AI applications. The sources said that the decision followed weeks of negotiation and high-level meetings, notably including Nvidia CEO Jensen Huang's encounter with President Donald Trump at the White House in early August. The actual issuance of export licenses began soon after those talks.
While there have been cases of the US government leveraging domestic investments or imposing tariffs to bring manufacturing jobs and revenue home, experts say no American company has previously paid a fixed share of revenues to secure export permissions. "This seeming quid pro quo is unprecedented from an export control perspective," Jacob Feldgoise of the Center for Security and Emerging Technology told Bloomberg. Bernstein analysts told the New York Times that this deal could generate over $2 billion for the US government by year's end, with Nvidia expected to sell more than $15 billion worth of its H20 chip in China and AMD about $800 million.
The genesis of the deal stems from escalating tensions over AI technology security. Sales of high-performance chips to China were abruptly banned by the Trump administration in April, citing the potential for advanced AI technologies to bolster China's military and economic edge. Yet, after successive lobbying efforts by Nvidia and a reassessment of competitive risks – particularly the prospect of Chinese companies like Huawei cornering the AI hardware market – the administration reversed its ban for these specific chips but imposed the revenue-sharing condition. Nvidia argued that continued access to the Chinese market was essential for maintaining the US' global technology leadership.
Not everyone sees the deal favorably. National security experts have raised concerns that monetizing export controls could incentivize further pressure from Beijing to relax US restrictions on other sensitive technologies. "This is an own goal and will incentivize the Chinese to up their game and pressure the administration for more concessions," said Liza Tobin, a former China director at the National Security Council. A bipartisan group of ex-officials and specialists wrote to the administration calling the decision "a strategic misstep that endangers the United States' economic and military edge in artificial intelligence."
For its part, Nvidia responded to inquiries stating, "We follow rules the US government sets for our participation in worldwide markets." The company added that "While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide. America cannot repeat 5G and lose telecommunication leadership. America's AI tech stack can be the world's standard if we race." AMD did not comment on the matter.
The ramifications for the market remain uncertain. On one hand, the arrangement opens a lucrative channel for major US chip manufacturers in China, albeit at a significant cost. On the other hand, it raises questions about the future role of the government in regulating and profiting from strategic high-tech exports.