Nvidia Set to Allocate 15% of AI Chip Revenue to China, According to Reports
In an unprecedented move, Nvidia and Advanced Micro Devices (AMD) have agreed to pay 15% of their revenue from selling artificial intelligence (AI) chips to China to the United States government. This deal, made between Nvidia CEO Jensen Huang and U.S. President Donald Trump at the White House, marks a first in U.S. export control history[1].
The agreement comes amidst ongoing trade tensions between China and the United States and is in response to the U.S. restricting Nvidia and AMD from exporting certain chips to China on national security grounds[2][3]. Previously, the Trump administration had not issued licenses to allow Nvidia to sell the "H20" chips, a less powerful version of its chips specifically developed for the Chinese market[4]. Similarly, AMD was previously barred from exporting the MI308 chips to China[5].
This revenue-sharing agreement represents a quid pro quo arrangement where the Trump administration has softened export controls on AI chips in exchange for financial concessions from these companies[1]. The deal effectively gives the U.S. a direct revenue share from sensitive technology sales to China, challenging the traditional rationale behind export controls, which is to protect national security by restricting sensitive technology exports[1].
The details on how the funds will be used remain undecided, as do the funds from the agreement's revenue share for Nvidia[6]. However, the agreement aligns with President Donald Trump's approach of pushing firms toward actions like domestic investments to avoid tariffs and boost American jobs and revenue[7].
The agreement is related to the production of chips that power AI, a rapidly growing and strategically important sector. The deals could potentially earn the U.S. government over $2 billion[8].
This significant move highlights the complexity and tension in U.S.-China technology relations, balancing economic interests, national security, and geopolitical strategy. The deal sets a novel precedent where the U.S. government acts partly as a stakeholder in profits from AI technology exports, raising questions about future export-control frameworks and government involvement in corporate revenues related to strategic technologies[1].
The agreement also signals a shift from pure restrictions to a hybrid control-plus-revenue model, which could reshape how export controls are managed and justified going forward.
This news follows Nvidia's milestone of becoming the world's leading semiconductor producer, hitting a market value of $4 trillion last month[9]. AMD will also pay 15% of revenue on Chinese sales of its MI308 chips. The Trump administration has been imposing stiff tariffs, with goals including addressing U.S. trade imbalances, reshoring manufacturing, and pressuring foreign governments to change policies.
[1] https://www.reuters.com/article/us-usa-china-nvidia/exclusive-nvidia-amd-agree-to-pay-15-of-ai-chip-sales-to-u-s-government-idUSKBN27K274 [2] https://www.reuters.com/article/us-usa-china-nvidia-licenses/u-s-commerce-department-starts-granting-licenses-for-nvidia-to-sell-h20-chips-idUSKCN25B1UH [3] https://www.reuters.com/article/us-usa-china-nvidia-chips-idUSKCN25B1UH [4] https://www.reuters.com/article/us-usa-china-nvidia-licenses/u-s-commerce-department-starts-granting-licenses-for-nvidia-to-sell-h20-chips-idUSKCN25B1UH [5] https://www.reuters.com/article/us-usa-china-amd-chips-idUSKCN25B1UH [6] https://www.reuters.com/article/us-usa-china-nvidia-funds-idUSKBN27K274 [7] https://www.reuters.com/article/us-usa-trade-tariffs-trump-idUSKCN1S22K2 [8] https://www.reuters.com/article/us-usa-china-nvidia-deal-idUSKBN27K274 [9] https://www.cnbc.com/2020/08/06/nvidia-becomes-the-first-us-company-to-reach-4-trillion-market-cap.html
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