Unprecedented Deal: Nvidia and AMD Agree to Give 15% of China Sales to US Government

Strategic Insights -

As part of a highly unusual arrangement with President Trump, Nvidia and Advanced Micro Devices (AMD) will give the US government 15% of their revenue from selling artificial intelligence (AI) chips to China. This deal was finalized after Nvidia's CEO, Jensen Huang, met with President Trump at the White House, agreeing to share the revenue with the federal government. The Commerce Department will now grant licenses for AI chip sales to China, despite the administration's previous ban on such exports. Nvidia is expected to sell over $15 billion worth of its H20 chip to China through the end of the year, while AMD is expected to sell $800 million.

Key Takeaways:

  • Nvidia and AMD will give the US government 15% of their revenue from selling AI chips to China, essentially making the federal government a partner in their business in China.
  • The deal comes after Nvidia received permission to sell its H20 AI chip to China, a reversal of the Trump administration's previous ban on such exports.
  • Nvidia's CEO, Jensen Huang, argued that preventing AI chip sales to China would hurt US tech companies, and urged President Trump to let Nvidia and AMD compete for those sales in China.
  • The deal has been met with outcry from national security experts who worry that it will incentivize China to pressure other companies to make similar arrangements, potentially loosening restrictions on other technology exports.
  • Nvidia's wins in Washington have brought it headaches in Beijing, with China's internet regulator summoning the company's CEO to a meeting over concerns about the H20 chip's potential backdoor security risks.
  • The agreement is part of President Trump's increasingly interventionist role in international business deals involving American companies, including the administration's use of tariffs as a stick to bring manufacturing to the US.
  • The deal could funnel more than $2 billion to the U.S. government, but has major implications for the race between the United States and China to develop artificial intelligence.

Statistics:

  • Nvidia is expected to sell over $15 billion worth of its H20 chip to China through the end of the year.
  • AMD is expected to sell $800 million worth of its A.I. chip, the MI308, to China.
  • The Commerce Department will grant licenses for AI chip sales to China, despite the administration's previous ban on such exports.
  • The deal gives the US government 15% of revenue from AI chip sales to China.
  • President Trump has said that tech companies would have to pay a 100% tariff on semiconductors made abroad, unless they invested in the United States.

Sources:

  • Three people familiar with the agreement who spoke anonymously because they didn't have permission to discuss it publicly.
  • Jensen Huang, Nvidia's chief executive.
  • Ken Brown, a spokesman for Nvidia.
  • Liza Tobin, a former China director at the National Security Council during the Trump and Biden administrations.
  • The Financial Times.
  • Howard Lutnick, the Commerce Secretary.
  • Matt Pottinger and David Feith, two former national security officials in the Trump administration.
  • The Special Competitive Studies Project, a think tank.