U.S. set to receive 15% of revenues from Nvidia and AMD's China chip sale earnings, according to a recent report.
Nvidia and AMD Agree to Pay 15% of Revenues from AI Chip Sales in China to the US Government
In a highly unusual move, Nvidia and AMD have agreed to pay 15% of their revenues from AI chip sales in China to the US government in exchange for export licenses allowing them to resume these sales. This arrangement was confirmed by US officials and marks a significant shift in US trade and export policy towards China’s semiconductor market.
The deal allows Nvidia to export its H20 AI accelerator chips and AMD to export its MI308 processors specifically designed to comply with US export controls. The US government, under President Trump, had previously imposed a ban on sales of advanced chips to China citing national security and military concerns, particularly related to next-generation weapon systems technology.
As a "middle ground" solution, this deal permits chip sales to resume but captures a portion of the revenue. Treasury Secretary Scott Bessent said the money could be used to pay down the US national debt and possibly return funds to taxpayers if successful.
The licensing deal has sparked debate, given its novel nature—corporations rarely pay the government a share of export revenues; this could become a model for other industries. Notably, President Trump personally negotiated with Nvidia CEO Jensen Huang, initially seeking a 20% share but settling on 15% "for the country," emphasizing national benefit over personal gain.
The chips involved are not the most advanced models but are important in the AI hardware market that China demands. Prior export restrictions and stalled license grants had hurt company revenues and market decisions, and this agreement has opened the door for renewed sales under government oversight.
The Financial Times reported the news on Sunday, August 10, citing a US official as its source. The US last month reversed an April ban on the sale of the H20 chip to China. However, it's worth noting that Nvidia has not shipped H20 chips to China for months. The US government has yet to determine how to use the money from the chip sales.
AMD did not immediately respond to a request for comment regarding the new development. Nvidia, on the other hand, hopes the export control rules will allow them to compete in China and worldwide.
References:
- Financial Times
- Bloomberg
- Reuters
- The Verge
In this agreement, Nvidia and AMD are expected to channel 15% of their revenues from AI chip sales in China towards the US government, signifying a novel approach in US trade and export policy. This revenue could potentially be utilized to reduce the US national debt, as suggested by Treasury Secretary Scott Bessent.
The deal's emphasis on national interests, as negotiated by President Trump with Nvidia CEO Jensen Huang, brings technology and finance together, with a portion of the profits from advanced AI chips sales in China contributing to the US national debt.
