TLDR: The U.S. government has entered into an unprecedented agreement with leading chipmakers Nvidia and AMD, allowing them to resume sales of advanced artificial intelligence (AI) chips to China. In exchange for securing export licenses, both companies will remit 15% of their revenue generated from these specific AI chip sales to the U.S. government. This controversial deal, finalized after extensive lobbying, has drawn criticism for blurring national security lines and being labeled a ‘federal shakedown’ by some commentators.
In a groundbreaking and controversial move, the U.S. government has established an unprecedented revenue-sharing agreement with American semiconductor giants Nvidia and Advanced Micro Devices (AMD). This deal permits the companies to resume the export of their advanced artificial intelligence (AI) chips, specifically Nvidia’s H20 and AMD’s MI308, to China. Under the terms of the agreement, both Nvidia and AMD will pay 15% of their China-derived revenue from these particular AI chip sales directly to the U.S. government in exchange for the necessary export licenses.
This arrangement marks a significant shift in U.S. export control policy, which had previously restricted the sale of such high-performance chips to China due to national security concerns, fearing their potential use in enhancing military capabilities. The deal follows months of intense lobbying efforts, notably by Nvidia CEO Jensen Huang, who reportedly met with President Donald Trump to advocate for the resumption of sales after an earlier ban imposed in April was reversed in June.
Critics have swiftly condemned the agreement, arguing that it blurs the line between national security imperatives and commercial interests. Deborah Elms, head of trade policy at the Hinrich Foundation, stated, ‘You either have a national security problem or you don’t. If you have a 15% payment, it doesn’t somehow eliminate the national security issue.’ Economist Peter Schiff and capital markets commentator The Kobeissi Letter have labeled the arrangement an ‘unconstitutional’ ‘federal shakedown,’ criticizing the revenue-based payment rather than profit. Charlie Dai, vice president at Forrester Research, described the agreement as ‘unprecedented’ and warned it ‘creates substantial financial pressure and strategic uncertainty for tech vendors.’ Experts agree that there is no historical precedent for U.S. corporations agreeing to pay a portion of their revenue to the government to obtain export licenses.
Financially, the implications are substantial. Bernstein analysts estimate Nvidia’s H20 revenue from China this year could reach approximately $23 billion, which would translate to roughly $3.45 billion for the U.S. government. Similarly, AMD’s MI308 chip sales in China, projected to generate $3-5 billion in 2025, could yield an annual cut of $450 million to $750 million for the U.S. government. While the resumption of sales offers a lucrative revenue stream for the companies, the 15% remittance will directly impact their net proceeds and margins.
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Nvidia, in response to the deal, expressed hope that ‘export control rules will let America compete in China and worldwide,’ further cautioning that ‘America cannot repeat 5G and lose telecommunication leadership,’ suggesting that the U.S. AI tech stack could become ‘the world’s standard if we race.’ However, the policy also carries the risk of accelerating China’s drive towards domestic chip independence, potentially challenging U.S. firms’ long-term global dominance in AI hardware. The agreement comes amidst tentative signs of easing US-China trade tensions, with both countries having agreed to a 90-day tariff truce in May, though its extension remains uncertain.
