How Nvidia is tangled in Trump's dispute with China; 5 things to know

Mint

6 days ago

Nvidia has brokered a deal with the Trump administration that will permit the chipmaker to sell specific artificial intelligence (AI) chips to China in exchange for paying 15% of its revenue from those sales to the US government.
Advanced Micro Devices (AMD) also signed this deal for some of its chips, a step towards maintaining America's AI dominance, while securing a critical trade agreement with China.
This agreement follows an earlier ban on the export of certain chips, including Nvidia's H20 and AMD's MI308, which was part of a broader effort to slow China's progress in AI and maintain the US's technological edge, CNN reported.
Under the terms of the deal, Nvidia and AMD will pay the US government a 15% commission on the revenue generated from their sales of these 'less advanced' AI chips in China. The agreement effectively provides a path for the companies to obtain the necessary export licenses, which were blocked.
The deal only allows the export of Nvidia's H20 chips, to which Trump said that the H20 chip is 'obsolete,' adding that China 'already has it in a different form.'
While Trump initially sought a 20% cut, the rate was reportedly negotiated down to 15% during a meeting with Nvidia CEO Jensen Huang last week at the White House.
Nvidia released the H20 chip last year as a way to maintain access to the Chinese market. The chipmaker has a line of much powerful chips, including H100 and H200 series chips, as well as its "super-advanced" Blackwell line of chips.
Trump said that Nvidia could export its super high-end Blackwell chips, but for that, the company would have to pay a higher commission to the US government.
The administration's reversal is viewed as an acknowledgement that China is advancing in AI regardless of US restrictions, and that it is better for American companies to benefit from this market rather than forcing China to develop its own alternatives or acquire chips through illicit channels.
It could also give the White House another way to raise revenue for the US government, along with tariffs, giving it billions of dollars to spend as it wishes.
That approach would align with arguments from Nvidia's Huang, who said restricting sales of American AI chips is bad for US national security, as Chinese developers could simply undermine US leadership by creating their own alternatives.
Despite this latest approach, one concern remains: the H20 chips exported to China earlier are widely believed to have contributed to DeepSeek, an advanced Chinese AI model that shook Silicon Valley upon its release earlier this year, raising concerns that China was further ahead on AI than previously understood.
For Nvidia, this deal is a significant development as the Chinese market accounted for roughly 13% of its sales in 2024. After the Trump administration barred the sale of H20 chips to China in April, it resulted in billions of dollars in lost revenue for the company, CNN reported.
So, even if the company has to give a cut of 15% of those sales to the White House, it allows them to resume shipments of the H20 to China, which could mean billions more dollars in revenue for Nvidia.
Combined, Nvidia and AMD could earn as much as $35 billion annually from sales of their H20 and MI308 chips to China, according to data compiled by CNN. That means the White House would earn around $5 billion in revenue, the news report said.