Nvidia and AMD Agree to Revenue-Sharing Deal with U.S. Government Over AI Chip Sales to China

In a landmark agreement announced on August 10, 2025, U.S. semiconductor giants Nvidia and AMD have consented to remit 15% of their revenue from artificial intelligence (AI) chip sales to China to the U.S. government. This arrangement facilitates the issuance of export licenses for Nvidia's H20 and AMD's MI308 chips, which had previously been restricted due to national security concerns.

The U.S. Department of Commerce had imposed stringent export controls in October 2022, aiming to curb China's access to advanced computing technologies. These measures were designed to prevent the development of military applications and surveillance systems that could threaten U.S. interests. As a result, sales of high-performance AI chips to China were halted, significantly impacting the revenues of companies like Nvidia and AMD.

Under the new agreement, both companies will allocate 15% of their revenues from AI chip sales to China to the U.S. government. President Donald Trump confirmed the terms, noting that he initially sought a 20% share but settled on 15% after negotiations with Nvidia CEO Jensen Huang. "So we negotiated a little deal. So he's selling an essentially old chip," Trump stated, referring to the H20 model.

The deal has elicited mixed reactions. Republican Representative John Moolenaar and Democratic Representative Raja Krishnamoorthi have questioned the legal basis and national security implications of what some are calling a "creative taxation scheme." Analysts like Derek Scissors from the American Enterprise Institute criticized the deal as an unofficial export tax, potentially unconstitutional and risky for national security.

Despite previous U.S. export bans leading to significant write-downs—Nvidia lost $4.5 billion in unsold inventory—the companies view the revenue-sharing levy as an acceptable cost due to high profit margins and the ability to pass some of the extra cost to Chinese buyers. However, challenges remain, including ongoing unauthorized chip imports into China, and China's increasing ability to produce its own high-end chips and more efficient AI models. The rise of Chinese competitors like DeepSeek and Huawei threatens the long-term viability of U.S. chip exports to China.

Nvidia and AMD have significant exposure to the Chinese market. In recent fiscal years, China contributed $17 billion (13% of revenue) for Nvidia and $6.2 billion (24%) for AMD. The agreement allows these companies to maintain access to this critical market, albeit at the cost of sharing a portion of their revenues with the U.S. government.

The deal reflects ongoing tension in the U.S.-China tech rivalry, particularly over AI development and semiconductor access. The Biden administration has linked the chip sales resumption to a broader trade agreement involving rare earth magnets. Critics argue that the agreement potentially trades national security for revenue gains, and the administration has not defined how or when the payment mechanism will be enacted.

This unprecedented revenue-sharing agreement between Nvidia, AMD, and the U.S. government underscores the complex interplay between economic interests, national security, and international trade relations. As the global technology landscape continues to evolve, such arrangements may set precedents for future export control policies and the strategic positioning of U.S. companies in international markets.