Trump's Chip Industry Grip: AI Export Deals & Micromanagement

In a striking display of direct presidential intervention, President Trump recently secured an unprecedented deal from Nvidia, the world’s most valuable publicly traded company. During an Oval Office meeting, the President demanded a 20 percent share of revenues from Nvidia’s sales of artificial intelligence chips to China in exchange for export licenses. Following a brief negotiation, Nvidia’s chief executive, Jensen Huang, successfully countered with a 15 percent offer, which the administration accepted. Two days later, the licenses were granted, with the unorthodox payments expected to flow directly to the government.

This negotiation serves as a prominent example of President Trump’s blunt and extensive involvement in the global operations of the semiconductor industry. Over the past eight months, he has positioned himself as the ultimate decision-maker for this economically and strategically vital sector, which produces essential components for everything from advanced AI systems to military hardware. His tactics have included threatening to withhold government grants, restricting billions in sales, warning of high tariffs on foreign-made chips, demanding significant investments, and even urging Intel to replace its chief executive. This approach marks a significant departure from the hands-off economic philosophy that has guided the Republican Party for decades, notably under President Ronald Reagan.

Economic historians describe this federal incursion into the U.S. economy as the most aggressive since the Obama administration’s 2008 interventions to rescue banks and the auto industry during the financial crisis. Unlike those actions, however, this current intrusion is widely viewed as unprovoked. Anne E. Harrison, a professor of economics at the University of California, Berkeley’s Haas School of Business, characterized it as “not rational industrial policy,” but rather “intervention into who runs companies and threatening businesses with penalties if they don’t do what Trump says.” She concluded, “He’s micromanaging.” The legality of these new deals, particularly the collection of fees for export licenses from companies like Nvidia and Advanced Micro Devices, remains unclear, as there is no government precedent for such arrangements. The Commerce Department has not commented on how these payments will be collected or where they will be directed.

The President’s assertive tactics have understandably put the $600 billion semiconductor sector on edge. Chip manufacturers rely heavily on predictability; building new plants requires years and investments often exceeding tens of billions of dollars, while chip design and production processes also span years. According to Jimmy Goodrich, a senior adviser at the RAND Corporation and former policy leader at the Semiconductor Industry Association, companies now face constant uncertainty regarding potential presidential pressure to alter their business plans. Industry leaders are left with little recourse but to directly appeal to the President, often with financial commitments or symbolic gestures, such as the gold-based plaque Apple CEO Tim Cook presented to Mr. Trump last week. Goodrich described the situation as a “roller-coaster ride,” noting that Trump addresses issues on an ad-hoc basis, making the industry’s direction unpredictable.

Beyond their crucial role in the artificial intelligence boom, which has propelled Nvidia to a $4.4 trillion valuation, chips are fundamental to modern weaponry and virtually every electronic device. A significant concern for the U.S. is that most advanced chips are manufactured in Taiwan, a self-governing island that faces the constant threat of a Chinese invasion. President Trump’s interventions are partly driven by a push to onshore more of this critical production. White House spokesman Kush Desai affirmed that the industry’s importance justifies the President’s direct involvement, stating that “Americans cannot afford another autopen administration lackadaisically dropping the ball,” and that Trump’s “hands-on leadership” underscores a commitment to national and economic security.

During his previous term, Mr. Trump initiated efforts to bolster domestic chip manufacturing, including blocking chip companies from working with Chinese tech giant Huawei and collaborating with Taiwan Semiconductor Manufacturing Corporation (TSMC) to establish an advanced chip factory in Arizona. President Joseph R. Biden Jr. expanded on these efforts with the bipartisan CHIPS Act, allocating $52 billion in subsidies and tax credits for U.S. chip manufacturing, and further restricted semiconductor sales to China.

Since returning to office, President Trump has intensified pressure. Earlier this year, his administration threatened to withhold grants from chip companies unless they committed to greater U.S. investments. He also warned tech executives of potential tariffs on semiconductors unless they increased purchases of U.S.-made chips, initiating a national-security-related investigation under Section 232 to explore such levies. These pressures have yielded results: TSMC announced a $100 billion investment in three new factories and two packaging facilities in the U.S., while Micron Technology committed an additional $150 billion to its U.S. operations.

Many executives, navigating what are sometimes personal attacks from the President, have opted to travel to Washington to plead their cases directly. Chris Miller, a history professor at Tufts University and author of “Chip War,” observed that CEOs have found the most effective strategy is to forge a direct relationship with the President, as traditional industry lobbying has become “much less potent.”

Jensen Huang, Nvidia’s CEO, has emerged as a de facto industry leader in these dealings. Despite an April setback when Mr. Trump restricted sales of Nvidia’s H20 chip to China, costing the company $5 billion, Huang has continued to engage. He traveled with the President to the Middle East, helping negotiate a massive deal to sell 500,000 semiconductors to the United Arab Emirates. Subsequently, at a White House meeting in July, Huang successfully lobbied Mr. Trump to lift the ban on AI chip sales to China, arguing the chips were less powerful than those sold domestically. However, the necessary export licenses were not immediately granted. It was upon Huang’s return to the White House last week to press for these licenses that Mr. Trump seized the opportunity to secure the 15 percent revenue share for the federal government.

Similarly, Apple’s Tim Cook appeared with Mr. Trump last week to announce an additional $100 billion investment in the United States, some of which will benefit U.S. chipmakers. This followed earlier public criticism from Mr. Trump, who accused Apple of dragging its feet on bringing manufacturing back to the U.S. During Cook’s visit, the President also announced plans for a 100 percent tariff on foreign semiconductors, promising exemptions for companies that, like Apple, invested domestically. On Monday, Mr. Trump even hinted that Nvidia might be allowed to sell a less powerful version of its newest, more potent AI chip to China, “for the right price,” suggesting another meeting with Huang was imminent. Nvidia has declined to comment, reiterating only that it adheres to government regulations.

The same day, Mr. Trump met with Intel’s new chief executive, Lip-Bu Tan. This meeting occurred just days after Mr. Trump publicly demanded on social media that Intel change its leadership, labeling Mr. Tan “highly CONFLICTED.” This attack followed a guilty plea by Cadence Systems, a company Mr. Tan previously led, for violating U.S. restrictions by selling technology to a Chinese university involved in nuclear explosive simulations. After their meeting, Mr. Trump softened his demand for a leadership change but implied that his engagement with Intel was far from over, stating that Mr. Tan would meet with cabinet officials and “bring suggestions to me.”