US Gov to Get 15% Cut from Nvidia, AMD AI Chip Sales to China
In an unprecedented move, the United States government is set to claim a substantial share of the revenue generated by American chipmakers Nvidia and Advanced Micro Devices (AMD) from their artificial intelligence (AI) chip sales to China. Under a highly unusual financial agreement struck with the Trump administration, both companies are expected to remit 15 percent of their proceeds from these sales to the federal government.
This extraordinary pact comes swiftly on the heels of Nvidia receiving a public green light last month to sell a version of its AI chips, specifically the H20 model, to the Chinese market. However, despite the public announcement, the crucial export licenses necessary to facilitate these sales had not yet been issued. The deadlock was reportedly broken during a White House meeting on Wednesday between Nvidia CEO Jensen Huang and President Trump. During this discussion, Mr. Huang agreed to the 15 percent federal cut, effectively positioning the U.S. government as a direct financial partner in Nvidia’s Chinese operations. According to sources familiar with the arrangement, the Commerce Department began issuing the necessary licenses just two days later.
While Mr. Huang spearheaded the negotiations, Nvidia is not the sole company impacted. AMD, which sells its MI308 AI chip, also faced a ban on sales to China imposed by the Trump administration in April. The terms of this new revenue-sharing agreement are expected to extend to AMD as well.
This revenue-sharing model for export licenses is exceedingly rare, with few historical parallels at the Commerce Department. However, the unorthodox payments align with President Trump’s increasingly interventionist approach to international business deals involving American companies. This trend was previously evidenced in June, when his administration approved Japanese company Nippon Steel’s investment in U.S. Steel, a deal that reportedly included a “golden share” granting the government a direct stake in the business – a practice seldom employed. The administration has also been leveraging steep tariffs as a tool to compel domestic manufacturing, with Mr. Trump last week proposing a 100 percent tariff on semiconductors made abroad unless companies invest within the United States.
The financial implications of this deal are significant, potentially funneling over $2 billion into U.S. government coffers. Bernstein Research estimates Nvidia’s H20 chip sales to China could exceed $15 billion through the end of the year, with AMD’s sales projected at $800 million. Neither the Commerce Department, the White House, nor AMD provided immediate comment on the agreement, while Nvidia spokesman Ken Brown affirmed the company’s commitment to adhering to U.S. export rules. "While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,” he stated.
The licensing deal immediately ignited strong opposition among national security experts, many of whom have consistently advocated against AI chip sales to China. Their primary concern is that the Trump administration’s decision to leverage export licenses for financial gain will inadvertently incentivize Beijing to pressure other companies into similar arrangements, potentially loosening restrictions on other critical technologies like semiconductor manufacturing tools and memory chips. “This is an own goal and will incentivize the Chinese to up their game and pressure the administration for more concessions,” warned Liza Tobin, a former China director at the National Security Council across both the Trump and Biden administrations. She characterized the move as "the Trump playbook applied in exactly the wrong domain. You’re selling our national security for corporate profits.”
The administration’s approval for AI chip sales to China marks a striking reversal from its earlier stance. Just in April, the Trump administration had imposed a ban on such exports, citing concerns that the technology could be used to narrow the artificial intelligence gap between the United States and China. This policy flip has proven divisive, given its profound implications for the ongoing AI race between the two global powers. Nvidia’s chips are widely considered optimal for powering the complex computations underpinning advanced AI systems, boasting superior performance compared to offerings from its Chinese rival, Huawei.
Despite the reversal, the Trump administration maintains it will continue to block China from acquiring Nvidia’s most advanced chips. The H20 chip, specifically engineered for the Chinese market and previously approved for sale by the Biden administration, is deliberately designed to be less potent than the cutting-edge chips supplied to American enterprises and allied nations.
Mr. Huang reportedly persuaded President Trump by arguing that a complete ban would primarily harm American technology companies. He contended that such a prohibition would enable Huawei to dominate AI chip sales in China, the world’s largest semiconductor market, allowing it to reinvest its earnings into research and development and thereby accelerate its progress in closing the technological gap with Nvidia, AMD, and other Western firms. Instead, Mr. Huang urged President Trump to permit U.S. companies to compete for these sales, enabling them to use the generated revenue to bolster their own businesses. “The American tech stack should be the global standard, just as the American dollar is the standard by which every country builds on,” Mr. Huang articulated in a July podcast.
However, many national security officials focused on China vehemently disagree. In July, two former national security officials from the Trump administration, Matt Pottinger and David Feith, alongside 18 other experts with national security and economics backgrounds, co-authored a letter to the administration. They labeled the policy change “a strategic misstep that jeopardizes the United States’ economic and military leadership in artificial intelligence,” asserting that the H20 would be "a potent accelerator of China’s frontier A.I. capabilities, not an outdated chip.”
Nvidia’s victories in Washington have, paradoxically, created new challenges in Beijing. Late last month, China’s internet regulator, the Cyberspace Administration of China, summoned Mr. Huang to a meeting to discuss potential vulnerabilities or “backdoor” security risks associated with the H20 chip. Chinese state media has subsequently discouraged companies from purchasing the H20 over these concerns. Nvidia swiftly responded last week with a blog post unequivocally stating that its AI chips do not contain backdoors. The company also condemned a congressional effort to pass the Chip Security Act, which would mandate chip tracking to prevent technology smuggling to China. "There is no such thing as a ‘good’ secret backdoor — only dangerous vulnerabilities that need to be eliminated,” the company stated.
[[The U.S. government is now taking a cut of AI chip sales to China, sparking outrage over ‘selling national security for profit.’] ]