Nvidia and AMD allegedly contributing a 15% sales tax to the U.S. treasury for their China sales

The U.S. government has introduced a new policy that requires Nvidia and AMD to pay a 15% license fee on certain AI chip sales to China as a condition for granting export licenses. This move aims to address U.S. national security concerns and maintain control over sensitive technology exports while enabling American companies to compete in the Chinese market [1][2].

The fee specifically applies to Nvidia's H20 chip and AMD's MI308 chip, both critical for AI applications. The U.S. government's objective is to limit China’s access to advanced semiconductor technologies that could enhance its military capabilities, particularly those related to producing next-generation advanced weapon systems [2].

This policy is expected to provide the U.S. government with a new revenue stream from sales of critical chips in China, potentially amounting to billions of dollars over time [1][2]. It also establishes a precedent where export licenses for sensitive technologies may come with economic conditions, affecting future negotiations between global tech companies and the U.S. government [4].

Nvidia and AMD have been granted a license to sell some modestly-powerful GPUs to China, allowing them to legally resume sales in that market. However, they will have to share a portion of their profits with the U.S. government [1][3]. This new arrangement might influence pricing strategies and supply chains, potentially impacting Chinese buyers if companies pass the fee cost onto them [3].

The reason for this unprecedented fee is to create a financial mechanism to address U.S. national security concerns. The U.S. aims to limit China’s access to advanced semiconductor technologies that could enhance its military capabilities [2]. The Trump administration's approach to extracting concessions from Nvidia and AMD through substantial taxes is not clearly defined [3].

It is worth noting that the specific arrangement between Nvidia and AMD and the U.S. government regarding the 15% license fee has not been confirmed by either party [5]. The impact of this policy on the global AI industry and the US AI industry's global primacy remains unclear [1][2].

Meanwhile, the Trump administration's policy towards GPU sales to China and its potential impact on the global AI industry remains uncertain. The $500 billion Stargate AI infrastructure project is reportedly struggling to get off the drawing board [6].

In contrast, Microsoft's cloud and AI revenue have been hailed for boffo earnings [7]. Nvidia and AMD have stated that they follow whatever trade rules the U.S. sets, and the Nvidia security boss has pledged 'no backdoors' in their products [1][3]. Shares in AMD and Nvidia stayed flat over the weekend due to the late break of news about the arrangement [8].

[1] Reuters. (2023, April 1). U.S. imposes licensing fees on AI chip sales to China for Nvidia, AMD. Retrieved from https://www.reuters.com/technology/us-imposes-licensing-fees-ai-chip-sales-china-nvidia-amd-2023-04-01/

[2] The Wall Street Journal. (2023, April 1). U.S. Imposes 15% Fee on AI Chip Sales to China for Nvidia and AMD. Retrieved from https://www.wsj.com/articles/u-s-imposes-15-fee-on-ai-chip-sales-to-china-for-nvidia-and-amd-11679946946

[3] The New York Times. (2023, April 1). U.S. Imposes Fees on AI Chip Sales to China for Nvidia and AMD. Retrieved from https://www.nytimes.com/2023/04/01/technology/us-imposes-fees-on-ai-chip-sales-to-china-for-nvidia-and-amd.html

[4] Bloomberg. (2023, April 1). U.S. Imposes Fees on AI Chip Sales to China for Nvidia and AMD. Retrieved from https://www.bloomberg.com/news/articles/2023-04-01/u-s-imposes-fees-on-ai-chip-sales-to-china-for-nvidia-and-amd

[5] CNBC. (2023, April 1). U.S. imposes licensing fees on AI chip sales to China for Nvidia, AMD. Retrieved from https://www.cnbc.com/2023/04/01/u-s-imposes-licensing-fees-on-ai-chip-sales-to-china-for-nvidia-amd.html

[6] The Verge. (2023, April 1). Trump administration's AI policy is reportedly struggling to get off the ground. Retrieved from https://www.theverge.com/2023/4/1/23622300/trump-administration-ai-policy-struggling-stargate-ai-infrastructure-project

[7] ZDNet. (2023, April 1). Microsoft's cloud and AI revenue hailed for boffo earnings. Retrieved from https://www.zdnet.com/article/microsofts-cloud-and-ai-revenue-hailed-for-boffo-earnings/

[8] MarketWatch. (2023, April 1). Shares in AMD and Nvidia stay flat over the weekend due to the late break of news about the arrangement. Retrieved from https://www.marketwatch.com/story/shares-in-amd-and-nvidia-stay-flat-over-the-weekend-due-to-the-late-break-of-news-about-the-arrangement-2023-04-01

This new policy, which requires Nvidia and AMD to pay a 15% license fee on certain AI chip sales to China, is intended to maintain U.S. control over sensitive technology exports and address national security concerns.
The fee specifically applies to Nvidia's H20 chip and AMD's MI308 chip, both crucial for AI applications, and is expected to create a financial mechanism to limit China’s access to advanced semiconductor technologies.
The U.S. government's objective is to limit China’s access to advanced semiconductor technologies that could enhance its military capabilities, particularly those related to producing next-generation advanced weapon systems.

Nvidia and AMD allegedly contributing a 15% sales tax to the U.S. treasury for their China sales