On Monday, it was confirmed by the White House that Nvidia and AMD have committed to sharing 15% of their revenues from sales to China with the U.S. government. This decision has ignited discussions regarding its potential effect on the chip industry's giants and whether similar arrangements might be sought by Washington.
In return for this revenue sharing, the two semiconductor companies are set to receive export licenses enabling them to sell Nvidia’s H20 and AMD’s MI308 chips in China, as reported by the Financial Times.
According to a statement from Nvidia to NBC News, “We adhere to the rules set by the U.S. government for our participation in global markets. Although our H20 shipments to China have been halted for months, we hope that export controls will allow America to compete globally, including in China. America’s AI technology stack has the potential to become the global standard if we adequately compete.”
AMD has confirmed it recieved china ai chip export licenses.
Crafted by the administration of U.S. President Donald Trump, this deal is deemed “unusual” by CNBC analysts, reflecting Trump's transactional nature. Investors see this as favorable for both Nvidia and AMD as it ensures continued access to the lucrative Chinese market.
Implications for Nvidia and AMD
Nvidia's H20 chip, designed to meet specific export criteria for China, was previously restricted by export regulations. However, the company recently announced it anticipated acquiring licenses to export this product to China.
Similarly, in July, AMD announced plans to resume the export of its MI308 chips.
The possibility of sales resuming in China was initially perceived as unconditional, leading markets to celebrate due to the considerable sales potential that became viable.
Nvidia's stock showed modest gains, and AMD’s shares rose over 2%, indicating investor confidence in the positive financial implications of the new deal.
Ben Barringer, a global technology analyst at Quilter Cheviot, said “For investors, keeping 85% of the revenue is still better than nothing at all.” He noted that the crucial issue is whether Nvidia and AMD will recalibrate their pricing to accommodate the levy, but emphasized the importance of preserving their market presence rather than ceding it entirely to Huawei.
Huawei stands as a leading Chinese competitor to Nvidia and AMD.
Despite the short-term optimism, uncertainty remains over longer-term implications for both U.S. companies.
George Chen, a partner at The Asia Group said, “The deal provides some short-term consistency for the companies’ Chinese exports. However, it's uncertain if the U.S. government might demand a larger revenue share should their Chinese sales continue to expand.”
Prospects for Similar Deals Unlikely
Analysts communicating with CNBC frequently described the arrangement as “unusual,” yet unsurprising for Trump.
Ben Barringer noted, “It's a favorable move, albeit peculiar, typical of President Trump’s deal-making style. He negotiates by reciprocity, setting an unorthodox precedent.”
Neil Shah from Counterpoint Research likened the revenue cut to an “indirect tariff at source.”
Daniel Newman, CEO of Futurum Group, remarked on X that this could be seen as a “sort of ‘tax’ for doing business in China.”
Nonetheless, analysts don't foresee similar deals for other industries.
Nick Patience of The Futurum Group commented, “I don’t expect it extending to other key sectors for the U.S. economy, such as software and services.”
Semiconductors, seen as strategic technology due to their fundamental role in areas such as AI, consumer electronics, and military applications, are subject to U.S. export controls unlike any other product.
George Chen from The Asia Group stated, “The semiconductor industry is quite unique, and this pay-to-play tactic might suit Nvidia and AMD as it hinges on obtaining U.S. government export approval.”
“Other companies like Apple and Meta present more complexity concerning their business models and operations in China.”
Potential Chinese Reaction
Semiconductors have grown into a contentious geopolitical subject. Recently, China has voiced concerns over the security of Nvidia’s chips.
Towards the end of last month, Chinese regulators asked Nvidia for clarification regarding possible security vulnerabilities and “backdoors.” Nvidia has refuted the presence of any “backdoors” within its chips that would permit unauthorized access or control. They restated this on Sunday following accusations from a Chinese state media-affiliated social media account.
A Global Times article criticized Washington’s tactics, citing an expert’s perspective.
The article stated, “This approach signifies that the U.S. government has abandoned its original security justification, leveraging economics to pressure U.S. chip makers into securing export licenses to China.”
The Chinese government has yet to comment on the reported revenue-sharing agreement.
Trump’s deal with Nvidia and AMD might evoke varied responses in China. While the arrangement may discontent China, Chinese firms would likely desire access to these chips to progress their AI advancements.
Neil Shah from Counterpoint Research remarked, “China faces a dilemma. They need these chips for their AI ambitions but the fee to the US government could increase costs. Additionally, concerns linger over potential U.S. ‘backdoors’ since the U.S. has sanctioned chipmakers' supplies."
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