US government reportedly to take cut of Nvidia and AMD AI chip sales to China

Boston Globe

a day ago

On Wednesday, Nvidia CEO Jensen Huang met with President Donald Trump at the White House and agreed to give the federal government its 15 percent cut, essentially making the federal government a partner in Nvidia's business in China, said the people familiar with the deal. The Commerce Department began granting licenses for AI chip sales two days later, these people said.
Though Huang has led negotiations with the White House, Nvidia isn't the only company that sells AI chips to China. AMD has an AI chip called the MI308 and in April the Trump administration also banned sales of it to the Chinese.
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There are few precedents for the Commerce Department agreeing to grant licenses for exports in exchange for a share of revenue. But the unorthodox payments are consistent with Trump's increasingly interventionist role in international business deals involving US companies. In June, the administration approved investment by Nippon Steel, a Japanese company, in US Steel in a deal that included a so-called golden share in the company, a rarely used practice where the government takes a stake in a business.
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The administration is also using tariffs as a stick to bring manufacturing to the United States. Last week, Trump said tech companies would have to pay a 100 percent tariff on semiconductors made abroad, unless they invested in the United States.
The deal agreed to last week could funnel more than $2 billion to the US government. Nvidia was expected to sell more than $15 billion worth of its H20 chip to China through the end of the year, and AMD was expected to sell $800 million, according to Bernstein Research.
The Commerce Department, White House and AMD didn't provide comment Sunday.
Ken Brown, a spokesperson for Nvidia, said the company follows the US government's rules for sales abroad. 'While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide,' he said.
The deal to license AI chips caused immediate outcry among national security experts who have been opposed to AI chip sales to China. They worry that the Trump administration's decision to leverage export licenses for money will encourage Beijing to pressure other companies to make similar arrangements to loosen restrictions on other technology, such as semiconductor manufacturing tools and memory chips.
'This is an own goal and will incentivize the Chinese to up their game and pressure the administration for more concessions,' said Liza Tobin, who previously served as China director at the National Security Council during the Trump and Biden administrations. 'This is the Trump playbook applied in exactly the wrong domain. You're selling our national security for corporate profits.'
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The Financial Times earlier reported on the deal between the chipmakers and the Trump administration.
Clearing the way for selling AI chips to China was a dramatic about-face by the Trump administration, which banned their sales to China in April. The administration restricted exports of those chips because of concerns that the technology could be used to close the gap between the United States and China in the development of artificial intelligence.
The administration's reversal on AI chip sales has been divisive because it has major implications for the race between the two countries to develop AI. Nvidia's chips are regarded as ideal for running some calculations that power AI and have better performance than those offered by its Chinese rival, Huawei.
The Trump administration has said that it will continue to prevent China from buying Nvidia's most advanced chips. It has said that the H20 chip, which was made specifically for China and was approved for sale by the Biden administration, is less powerful than the chips the company sells to US businesses and allies.
'We don't sell them our best stuff, not our second-best stuff, not even our third-best,' Commerce Secretary Howard Lutnick said during an appearance on CNBC last month. He said the goal was to stay one step ahead of China, so it would keep buying US chips.
Huang persuaded Trump to approve AI chip sales by arguing that preventing them would only hurt US tech companies. He has said a ban would allow Huawei to dominate sales of AI chips in China, the world's largest semiconductor market, and pump the money it makes into research and development to close the gap with Nvidia, AMD and others. Instead, he urged Trump to let Nvidia and AMD compete for those sales, so that they can use the money they make there to build their businesses.
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'The American tech stack should be the global standard, just as the American dollar is the standard by which every country builds on,' Huang said during a podcast recorded in July with the Special Competitive Studies Project, a think tank.
But many national security officials focused on China disagree. In July, two former national security officials in the Trump administration, Matt Pottinger and David Feith, and 18 other people with a mix of national security and economics expertise wrote a letter to the administration calling its policy change 'a strategic misstep that endangers the United States' economic and military edge in artificial intelligence.'
The group said that the H20 would be 'a potent accelerator of China's frontier AI capabilities, not an outdated chip.'
Nvidia's wins in Washington have brought it headaches in Beijing. Late last month, China's internet regulator, the Cyberspace Administration of China, summoned Huang to a meeting over the possibility that the H20 chip could have 'backdoor security risks.' Chinese state media has discouraged companies from buying the H20 over the issue.
Last week, Nvidia published a blog saying that its AI chips don't have back doors. It also condemned a congressional effort to pass a law known as the Chip Security Act, which would require it to track its chips as a way to prevent the technology from being smuggled to China.
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'There is no such thing as a 'good' secret backdoor -- only dangerous vulnerabilities that need to be eliminated,' the company said.
This article originally appeared in
.