In a bold and highly unusual move, U.S. chipmakers Nvidia and AMD have agreed to surrender 15% of their AI chip sales revenue from China to the U.S. government. This unprecedented deal serves as a condition for obtaining export licenses for advanced chips like Nvidia’s H20 and AMD’s MI308.
This marks the first time Washington has directly linked export approval to revenue sharing, signaling a potentially transformative shift in how strategic technology trade is regulated.
The Deal: How It Came Together
Earlier this year, the U.S. halted exports of the H20 chips under tightened national security controls. In July, after months of negotiations, the government approved licenses under the new terms. President Trump disclosed that during talks with Nvidia CEO Jensen Huang, he initially demanded a 20% cut, eventually settling at 15%.
Nvidia has stated it remains committed to following U.S. regulations and advancing AI innovation responsibly. AMD has been more reserved, focusing only on its adherence to export laws without addressing the revenue clause.
Why It Matters: Legal, Financial, and Strategic Impacts
1. Constitutional and Legal Concerns
Experts warn that this deal could test the boundaries of the U.S. Constitution. The Export Clause prohibits taxes on exports, but this revenue-sharing arrangement closely resembles one. Former officials like Christopher Padilla argue it risks politicizing export controls, turning them into tools for revenue generation rather than security policy.
2. Economic Impact on Chip Makers
The 15% levy could reduce margins on affected products by up to 15 percentage points. With Nvidia’s 2024 China sales estimated at $17 billion and AMD’s at $6.2 billion, U.S. collections could total billions annually—though only for certain chip models.
3. National Security & Precedent Setting
While the chips in question are modified to comply with U.S. performance thresholds, critics say the precedent could encourage financial deals over strict security reviews in future high-tech exports.
Broader Reactions and Implications
U.S. Political Response
Lawmakers from both parties have expressed skepticism. Rep. Raja Krishnamoorthi called the deal a “dangerous misuse” of trade policy and suggested Congress may investigate. This scrutiny could extend to future export license negotiations.
China’s Stance
Beijing’s foreign ministry condemned the agreement as an example of “technological containment.” Chinese state media accused the chips of having “security backdoors” and being environmentally unsound, claims U.S. companies reject.
Industry Commentary
Analysts see it as a pragmatic move—accepting lower margins in exchange for access to China’s vast AI market. However, they caution that similar demands could soon target other sectors, from aerospace to biotech.
Global Chip Trade Context
This deal comes amid an intense U.S.–China tech rivalry, especially over AI hardware. Since 2022, Washington has restricted exports of advanced GPUs to slow Beijing’s AI capabilities. China, meanwhile, has invested heavily in domestic semiconductor development to reduce dependency on foreign suppliers.
The H20 and MI308 chips were specifically designed to meet U.S. export compliance rules while still serving China’s AI market. Industry insiders note that removing China entirely as a customer could cost U.S. chipmakers billions, making negotiated access—however costly—preferable.
Potential Ripple Effects
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Legal Precedent: If challenged, the deal could set case law defining what counts as an “export tax” under the Constitution.
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Policy Expansion: Other high-tech sectors may face similar arrangements, reshaping U.S. export policy into a revenue-generating tool.
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Market Realignment: If U.S. companies find the cost too high, Chinese firms like Huawei or Biren Tech could gain market share.
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Diplomatic Tensions: Beijing could respond with tariffs, retaliatory licensing demands, or accelerated investment in chip self-sufficiency.
