Nvidia, AMD to pay US 15% of China AI chip sales

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(FILES) People attend a Nvidia production preview exhibition in Taipei on May 21, 2025. Chinese authorities summoned US technology giant Nvidia on July 31, 2025 to discuss "serious security issues" discovered involving its chips, the country's top internet regulator said. (Photo by I-HWA CHENG / AFP)
New York: Nvidia Corp and Advanced Micro Devices Inc (AMD) have agreed to pay 15% of their revenues from Chinese artificial intelligence (AI) chip sales to the US government in a deal to secure export licences, an unusual arrangement that may unnerve both US companies and Beijing.
Nvidia plans to share 15% of the revenue from sales of its H20 AI accelerator in China, according to a person familiar with the matter.
AMD will deliver the same share from MI308 revenues, the person added, asking for anonymity to discuss internal deliberations.
The arrangement reflects US President Donald Trump's consistent effort to engineer a financial payout for America in return for concessions on trade.
His administration has shown a willingness to relax trade conditions like tariffs in return for giant investments in the United States – as with Apple Inc's pledge to spend US$600bil on domestic manufacturing.
But such a narrow, select export tax has little precedent in modern corporate history.
Beijing, which has grown increasingly hostile to the idea of Chinese firms deploying the H20, is unlikely to warm to the idea of a chip tax.
Yuyuantantian, a social media account affiliated with state-run China Central Television that regularly signals Beijing's thinking about trade, on Sunday slammed the chip's supposed security vulnerabilities and inefficiency.
'This seeming quid pro quo is unprecedented from an export control perspective. The arrangement risks invalidating the national security rationale for US export controls,' said Jacob Feldgoise, a researcher at the Washington-based Centre for Security and Emerging Technology.
It 'will likely undermine the US' position when negotiating with allies to implement complementary controls,' he added.
'Allies may not believe US policymakers if they are willing to trade away those same national security concerns for economic concessions – either from US companies or foreign governments.'
A Nvidia spokesperson said the company follows US export rules, adding that while it hasn't shipped H20 chips to China for months, it hopes the rules will allow US companies to compete in China. AMD didn't respond to a request for comment.
The Financial Times earlier reported the development.
It followed a separate report from the same outlet that the Commerce Department had begun issuing H20 licences last week, days after Nvidia chief executive officer Jensen Huang met with Trump.
Huang has lobbied long and hard for the lifting of restrictions, arguing that walling China off will only slow the spread of American technology and encourage local rivals such as Huawei Technologies Co.
'It's a strategic bargaining chip' that tightens Washington's grip on a critical tech sphere during trade negotiations with China, said Hebe Chen, an analyst with Vantage Markets in Melbourne.
'Over time, this hurdle for chips entering China will likely deter Nvidia and AMD from deeper expansion in the world's largest chip-importing market, while giving local Chinese producers a clear edge to capture market share and accelerate domestic semiconductor innovation,' Chen said
If Washington goes ahead with the tax, it should funnel some capital to the United States – but not an enormous amount in relative terms.
Both Nvidia and AMD have said it'll take time to ramp back up production of their China-specific products – even if orders return to previous levels, which is uncertain.
Nvidia raked in US$4.6bil of revenue from the H20 in its quarter ended April 27 – days after new restrictions on shipping the AI accelerator to China were imposed.
It said it had been unable to ship US$2.5bil of H20 China revenue in that period because of the new rules. That implies it would have gotten more than US$7bil in H20 sales to China during the period.
If it can return to that level, the US government will stand to get about US$1bil a quarter from its deal.
AMD could generate US$3bil to US$5bil of revenue this year if restrictions were lifted, Morgan Stanley estimates.
Chinese alternatives such as Huawei's Ascend chips now account for 20% to 30% of domestic demand, it reckoned.
'The US government clearly needs the money given its deficits and eagerness to collect tariffs,' said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore.
'But the complication is China's accusations about H20 chips containing backdoors, which could be a negotiation tactic to highlight that the country is not that 'hard up' for US chips,' Ling added. — Bloomberg