Unusual Agreement Tied to Export Licenses

Nvidia (NVDA.O) and AMD (AMD.O) have agreed to give the U.S. government 15% of revenue from sales of advanced computer chips to China, a U.S. official said Sunday. The move, described as unusual and likely to unsettle corporate America, comes after the Trump administration in April halted sales of Nvidia’s H20 chips to China.

Last month, Nvidia announced Washington had granted permission to resume sales and expressed hopes to begin deliveries soon. Another U.S. official confirmed Friday that the Commerce Department had begun issuing licenses for the sale of H20 artificial intelligence chips to China. Both officials requested anonymity as details have not been made public.

Market Reaction and Potential Impact

Analysts warned that the levy could dent company margins. Nvidia shares dropped about 1% and AMD shares nearly 2% in premarket trading Monday.

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The arrangement marks President Donald Trump’s latest direct involvement in corporate decision-making. He has often pressed company leaders to invest in domestic jobs and manufacturing. Just last week, he demanded Intel’s new CEO Lip-Bu Tan resign, calling him “highly conflicted” over alleged ties to Chinese firms.

The U.S. official emphasized the administration did not view H20 or equivalent chip sales as a national security threat.

Experts Question Policy Logic

“It’s wild,” said Geoff Gertz, a senior fellow at the Center for New American Security. “Either selling H20 chips to China is a national security risk, in which case we shouldn’t be doing it to begin with, or it’s not a national security risk, in which case, why are we putting this extra penalty on the sale?”

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When asked about the 15% revenue payment, an Nvidia spokesperson stated: “We follow rules the U.S. government sets for our participation in worldwide markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”

Sales Loss Estimates and Company Positions

Nvidia previously warned that losing access to the Chinese market for H20 chips could reduce sales by $8 billion in its July quarter. AMD forecast a $1.5 billion revenue hit this year due to the restrictions. AMD did not comment on the reported agreement, first disclosed by the Financial Times.

“The Chinese market is significant for both these companies, so even if they have to give up a bit of the money, they would otherwise make it look like a logical move on paper,” said Russ Mould, investment director at AJ Bell. “That said, it is unprecedented and there is always the risk the revenue take could be upped or that the Trump administration changes its mind and re-imposes export controls.”

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International and Political Context

China’s foreign ministry, when approached Monday, reiterated its stance on U.S. chip export policy, previously accusing Washington of using technology and trade to “maliciously contain and suppress China.”

The Financial Times reported that the revenue-sharing condition was tied to export licenses for chips, including AMD’s MI308. The Trump administration has not yet determined how the funds will be used.

U.S. Commerce Secretary Howard Lutnick said last month that resuming AI chip sales was part of negotiations with China over rare earth supplies. He described the H20 as Nvidia’s “fourth-best chip” and argued it was in America’s interest for Chinese companies to remain dependent on U.S. technology, even if the most advanced chips were withheld.

Criticism from Former Officials

Alasdair Phillips-Robins, a former adviser at the Commerce Department under President Joe Biden, criticized the deal: “If this reporting is accurate, it suggests the administration is trading away national security protections for revenue for the Treasury.”

Nvidia earned $17 billion from China in the fiscal year ending January 26, accounting for 13% of total sales. AMD reported $6.2 billion from China in 2024, representing 24% of revenue. Bernstein analysts estimated the 15% levy could lower gross margins for affected chips by 5–15 percentage points, shaving roughly one point from overall gross margins.