Trump makes unusual deal with world's most valuable company

The Age

2 days ago

Nvidia and Advanced Micro Devices have agreed to pay 15 per cent of their revenues from Chinese AI chip sales to the US government in an unusual deal that threatens to set a precedent for American companies doing business in the Asian nation.
Nvidia, which is the world's most valuable public traded company with a market capitalisation of about $US4.5 trillion ($6.9 trillion), plans to share 15 per cent of the revenue from sales of its H20 AI accelerator in China, US President Donald Trump said in a briefing with reporters on Monday. AMD will deliver the same share from MI308 revenues, a person familiar with the situation said, asking not to be identified discussing internal deliberations.
Trump said he'd originally told Nvidia that he wanted a 20 per cent cut for the US if he cleared H20 sales to China but eventually settled for a 15 per cent share. The two negotiated 'a little deal,' he said.
The arrangement reflects 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 US — as with Apple's pledge to spend $US600 billion ($921 billion) 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 what it described as security vulnerabilities and inefficiencies of Nvidia's chip.
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The move comes amid a CNBC report that Trump is extending a tariff truce with China for another 90 days, stabilising trade ties between the world's two largest economies. The agreement had been due to expire on Tuesday.
AMD shares gained 1.2 per cent to $US174.84 in New York on Monday. Nvidia shares were up about 0.3 per cent. 'Both Nvidia and AMD already said they would start shipping to China, so that market reaction already happened,' said Jay Goldberg, an analyst at Seaport Global Securities. The big question is exactly when they're going to start delivering to China again, especially now that there are strings attached, Goldberg said.
'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 DC-based Center for Security and Emerging Technology.