China pushes back after Nvidia deal sparks controversy
Nvidia was blindsided earlier this year when the US government enacted tougher restrictions on selling artificial intelligence chips to China.
The restriction prevented Nvidia from selling its H20 chip within the Middle Kingdom, forcing CEO Jensen Huang to take a shockingly large $4.5 billion write-off for unsold chip inventory in the fiscal first quarter.
Nvidia wasn't the only one impacted. AMD, Nvidia's closest competition for graphic processors used to train and operate AI chatbots and agents, was forced to stop selling its Instinct MI308 AI chip in China, costing it $800 million in Q2.
Unsurprisingly, CEO Huang has been vocal in pleading the case for encouraging the adoption of US tech in AI globally to prevent China from gaining a greater foothold.
Those efforts weren't in vain, given that Huang's argument helped Nvidia and AMD ink a new deal with the US government in August to resume exports, but that deal, which requires stiff payments to the US, has raised concerns over "pay to play," with some more bluntly calling it a "shakedown."
The backlash has put US officials, including Treasury Secretary Scott Bessent, a former hedge fund manager, on the defensive, causing them to push back against criticism.
Those comments haven't sat well with China, which responded with harsh restrictions on Nvidia.
Nvidia-AMD China deal 'really weird' and 'crony capitalism'
The US government's rescission of Nvidia () and AMD's () export licenses was justified by concerns that providing next-gen AI chips to companies there could be a threat to national security if systems running on them ever targeted America.
Despite those concerns, the US reversed course this month after negotiations with Nvidia and AMD provided a framework for the companies to pay money to the US government based on China's chip sales.
Specifically, Nvidia and AMD agreed to fork over 15% of their China sales to the US government in exchange for the ability to market their chips there again.
In a CNBC interview on Aug. 13, Ray Wang, the founder and chairman of Constellation Research, called the surprising deal "bizarre" and "really weird."
Others have gone further.
'The willingness displayed in this arrangement to 'negotiate' away America's competitive edge that is key to our national security in exchange for what is, in effect, a commission on a sale of AI-enabling technology to our main global competitor, is cause for serious alarm," wrote six Democratic Senators, including Chuck Schumer and Elizabeth Warren, in a letter to President Trump on Aug 15.
Tulane University's Walter Isaacson said in a CNBC interview on August 21:
"State capitalism often evolves into crony capitalism, where you have favored companies and industries that pay tribute to the leader, and that is a recipe for not only disaster, but just sort of a corrupt sense of messiness.'
Bessent pushes back on Nvidia-China deal chatter
While the deal may not pass the sniff test with some, the White House believes agreements like this could provide much-needed money for America's coffers.
'I said, 'listen, I want 20% if I'm going to approve this for you, for the country," said President Trump in a press conference after the deal with Nvidia and AMD was made public.
Trump says Nvidia eventually convinced him to lower it to 15%, and that he wasn't concerned about the national security aspect as much because it is an 'old chip" and 'obsolete.'
The H20 is based on Nvidia's Hopper architecture rather than its current Blackwell. It is essentially a throttled-down version of the H100 and H200 chips preceding Blackwell and was launched in early 2024 as a successor to Nvidia's A100 chip.
More Nvidia:
Nvidia earnings face high bar on data-center demand, China deal
Nvidia quietly buys more stock in AI infrastructure favorite
Soros supercharges Nvidia stake, loads up on AI plays
In an interview with CNBC, Secretary Bessent doubled down on the fact that the deal only covers H20, which is less of a security threat than Blackwell chips.
When asked by host Joe Kernan if this was akin to a shakedown, Bessent responded:
"H20s are pretty far down the Nvidia stack. It's not a national security risk," said Bessent. "The last thing we want is Huawei belt and road where Huawei is selling chips to the rest of the world and the US is excluded."
Bessent went on to say that he and those in the industry want US technology to be the global standard.
That doesn't apply, however, to the latest technology - at least not yet. Bessent said that any next-gen chips built on the Blackwell architecture would require another export license.
China fires back at U.S. over Nvidia deal
Bessent wasn't the only US Cabinet member to make comments on the matter. Commerce Secretary Howard Lutnick, the former CEO of Wall Street firm Cantor Fitzgerald, suggested the Nvidia deal makes sense because it still keeps our latest technology out of Chinese hands.
"We don't sell them our best stuff, not our second best stuff, not even our third best. The fourth one down, we want to keep China using it," said Lutnick on CNBC.
The comments drew the ire of Chinese officials.
According to the Financial Times, the Cyberspace Administration of China (CAC), National Development and Reform Commission (NDRC), and Ministry of Industry and Information Technology (MIIT) are telling buyers to press pause on H20 orders.
Specifically, the CAC instructed tech companies, including ByteDance and Alibaba, to avoid buying H20 chips until a national security review is complete or they'll face fines, reports Engadget.
The NDRC similarly asked Chinese companies not to buy Nvidia chips.
China officials have been pushing for Chinese companies to buy more homegrown technology, rather than technology made in the West, particularly America.
How we got here: AI gold rush makes GPUs hot commodities
The sheer size of activity in AI is staggering, and there's a lot of money at stake. According to Grand View Research, the total AI ecosystem will enjoy 35.9% compound annual growth through 2030, reaching $1.8 trillion.Seemingly every industry is exploring potential use cases, including:
Manufacturing: Quality control and supply chain efficiency
Retail: Just-in-time inventory, anti-theft, and marketing
Financials: Money management and loan evaluation
Healthcare: Drug development, patient outcomes
The rush of activity is requiring tremendous computing power, and that's taxed legacy server networks heavily reliant on central processing units, or CPUs, less suited to handling AI workloads.
As a result, enterprises and cloud network providers, including hyperscalers Amazon, Microsoft, and Google, are plowing hundreds of billions of dollars into servers run on GPUs and software from Nvidia, primarily, that can do the work efficiently.
For perspective, Amazon's capital expenditures, or Capex, totaled $32.2 billion and Alphabet's totaled $22.4 billion in the second quarter, up from $17.6 billlion and $13.2 billion, respectively, in the same quarter last year.
Much of those dollars have flowed to Nvidia for its AI chips. In Q2, Nvidia's sales rose 69% to $44.1 billion.
Here is Nvidia's revenue over the past three years:
2025 $130.5 billion.
2024 $60.9 billion
2023: $27 billion
Most sales have been from US AI activity, but China has contributed to demand. Nvidia estimated that restrictions on the H20 cost it $8 billion in the second quarter alone.
The company is scheduled to report its fiscal Q2 results on August 27.
Todd Campbell owns Nvidia shares.
💵💰Don't miss the move: Subscribe to TheStreet's free daily newsletter 💰💵
China pushes back after Nvidia deal sparks controversy first appeared on TheStreet on Aug 20, 2025
This story was originally reported by TheStreet on Aug 20, 2025, where it first appeared.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
4 minutes ago
Rep. Pete Aguilar on California's response to Texas redistricting
The California Senate and State Assembly are considering a package of bills this week pushed by Democratic Gov. Gavin Newsom that would tee up a special election this fall.
New York Post
4 minutes ago
- New York Post
California Gov. Gavin Newsom signs redistricting measure in response to new Texas House map
California Democratic Gov. Gavin Newsom signed off Thursday evening on a redistricting plan aimed at countering Texas Republicans' planned implementation of new congressional maps for the Lone Star State. Newsom enacted the so-called 'Election Rigging Response Act,' setting a Nov. 4 special election asking whether Golden State voters approve of new House districts designed by legislators. The Democrat-controlled state Senate passed the special election measure in a 30-8 vote, shortly after the Dem-held state Assembly approved it in a 57-20 vote. Advertisement If the new map is approved by voters — and if it survives near-certain legal challenges — Democrats could win up to five additional House seats in next year's midterm elections, canceling out the five seats Republicans in Texas are expected to gain as a result of their redistricting push. Newsom announced that California would forge ahead with redistricting at a rally-like press conference in Los Angeles last week. AFP via Getty Images 'The president and the Texas Republicans are rigging the election … it is our duty to fight fire with fire,' state Sen. Jerry McNerney (D-East Bay) said during debate on the measure. Advertisement McNerney argued that 'California voters should have the right to decide if the state should respond to the president's effort to rig the election.' Since the measure seeks to override the Golden State's voter-approved, nonpartisan redistricting commission, a special election is necessary to redraw the existing congressional map. State Democrats maintain that the mid-decade redistricting measure is a one-off, needed to directly respond to Texas Republicans, but some in the legislature expressed fear that California would never return to its original system. President Trump strongly backed Texas' effort to redraw congressional maps in the Lone Star State. REUTERS Advertisement 'With the reported involvement of the [Democratic Congressional Campaign Committee] in this action – that has been developed behind the scenes – one has to be awfully suspicious of significant changes to this process,' argued Republican state Sen. Roger Niello (R-Sacramento County). 'Indeed, the intent or the power to continue on our previous track after 2030 is of great concern to me and I think should be of great concern to everybody who votes in favor of this,' he added. Former President Barack Obama weighed in on California's redistricting earlier this week at a DCCC fundraiser, arguing that Newsom's plan 'was a smart, measured approach' to counter Texas' move.
Fast Company
4 minutes ago
- Fast Company
Investing in early-in-career talent is vital to win the AI race
advertisement AI is fundamentally changing how we work. People will increasingly oversee more AI agents, changing the way we think about teams. Business leaders must shape what's next—not shrink from it. From job elimination to job evolution EIC employees are AI natives who are already leading the transformation. They intuitively engage with tech, bring creative agility, and have the curiosity needed to thrive in fast-changing environments. According to the World Economic Forum, job loss between 2025 and 2030 will be more than offset by new roles, leading to a net gain of 78 million jobs. As some roles and tasks phase out, new ones emerge that require skills like AI and data fluency, creative thinking, resilience, and curiosity. Subscribe to the Daily newsletter. Fast Company's trending stories delivered to you every day Privacy Policy | Fast Company Newsletters If we don't protect and modernize the EIC pipeline, we risk widening the skill gaps and stalling the impact and ROI of AI solutions. EIC talent will be tomorrow's leaders, so we need to build pathways for them today. The demographic and leadership imperatives The talent pipeline is narrowing just as the pace of transformation is accelerating. U.S. birth rates are declining. Fewer 18-year-olds are entering the workforce. Higher education costs are skyrocketing, and many high school graduates are choosing two-year and technical degrees or trade jobs. That makes every EIC hire even more valuable. HR leaders help define the structure of the workforce and manage payroll—the largest line on the profit and loss statement—so where we invest matters. EIC roles are often the smartest entry point for workforce planning. We need to build AI-first cultures rooted in continuous learning, with roles that fuel business and personal growth. That means doubling down on equipping early-career talent with the skills, creativity, and adaptability to lead AI-powered organizations. And our succession pipelines must prioritize leadership capabilities like AI fluency, orchestration, and human-centered change management. That means focusing on these key steps: Reimagine strategic workforce planning As leaders, we must identify the skills AI won't replace and the skills that matter most to our businesses—from programming and UX design to collaboration, creative problem solving, and empathy. Then we should map those skills to evolving roles. For example, if AI handles research, an entry-level role could evolve into a prompt engineer or curator. Other future roles could include AI safety and ethics coordinators and AI agent trainers for front line workers. Design new rotations and exposure Companies that invest in internships build future-ready talent pipelines. Internships today are table stakes. To stand out, we need to build rotational programs, apprenticeships, and real-world experiences that give EIC hires exposure across the business. Reverse mentoring, for example, could give EIC talent a chance to connect directly with senior leaders, while giving those leaders a window into AI-native thinking. The goal is to retain top talent by creating a culture of growth, mobility, and connection. With clear goals, meaningful work, strong managers, and real learning experiences, EIC talent has the chance to thrive and drive innovation. At ServiceNow, 95.6% of our interns accepted our full-time offers in 2024, proof of meaningful investment. Embrace AI-first learning for growth and retention Retaining top talent, especially early-in-career talent, starts with listening followed by meaningful action. Sixty-five percent of EIC workers say they'd stay at least four years at a company if it offered robust development opportunities. We need to show EIC talent how they can grow, and design learning that matches their curiosity. EIC employees expect learning to be personalized, bite-sized, and built into the workflow. That's why we launched ServiceNow University—to train our employees and the broader technology ecosystem. It's working: EIC hires at ServiceNow have a 7% lower attrition rate in their first two years than their peers. The long game: Invest in young talent and AI Leaders don't need to decide between cutting costs and investing in the future. They can do both when they focus on transforming the workforce. Organizations that lead with intention—those that rethink roles, invest in AI enablement, and reimagine EIC talent—will attract the best minds and shape the next era of innovation. We all have a lot to learn in this new world, and we should evolve our strategies as we go. But EIC employees are essential. Their fluency with technology, drive to learn, and creative edge are exactly what we need to build the future. We can't afford to sideline them. Committing to EIC talent will require a lot of hard work and vision, but with the right strategy, it is possible. Jacqui Canney is chief people and AI enablement officer at ServiceNow.
