Trump confirms landmark AI chip deal: NVIDIA and AMD to cede 15% of China AI revenue to U.S.

Trump Confirms Landmark AI Chip Deal: NVIDIA and AMD to Cede 15% of China AI Chip Revenue to U.S.

In a stunning development that signals a new era of geopolitical and economic strategy in the tech world, former U.S. President Donald Trump has confirmed an unprecedented agreement with leading GPU manufacturers NVIDIA and AMD. This accord mandates that both companies will surrender 15% of their revenue generated from AI chip sales to China back to the United States government. Trump himself revealed that his initial demand was for a 20% share, but NVIDIA CEO Jensen Huang successfully negotiated the figure down to the finalized 15%.

This arrangement is truly groundbreaking, effectively constituting a targeted tax on revenues from a specific market, offered in exchange for the privilege of continued trade. It also represents a significant intervention by the presidency into corporate decision-making processes. Trump's administration had previously exerted pressure on executives to invest in domestic U.S. manufacturing and even called for the resignation of Intel's new CEO, Lip-Bu Tan, due to his ties with Chinese companies. Analysts have voiced concerns that this additional levy could negatively impact the profitability of chip makers and set a perilous precedent for taxing critical U.S. exports, potentially extending beyond semiconductors in the future.

When directly asked about the 15% revenue concession, a NVIDIA representative stated, "We comply with the rules established by the U.S. government for our participation in global markets." An AMD spokesperson confirmed that the U.S. had approved its applications to export certain AI processors to China, but sidestepped direct commentary on the revenue-sharing agreement, emphasizing that the company adheres to all U.S. export regulations.

Restricting China's AI Ascendancy: A Strategic Chip Embargo

Further underscoring the strategic intent behind this deal, Trump indicated that future AI-oriented GPUs destined for the Chinese market will be deliberately engineered with diminished capabilities. The U.S. government will essentially prohibit the export of cutting-edge AI chips capable of the most advanced computations, compelling NVIDIA and AMD to supply China with significantly curtailed versions of their technologies. This move appears to be a calculated response to concerns that China could leverage advanced American AI capabilities to bolster its military strength.

Trump specifically referenced NVIDIA's H20 AI accelerator, characterizing it as “outdated” and significantly inferior to the state-of-the-art GPUs available to customers within the United States. The H20 has indeed been present in the Chinese market for some time, and its performance lags considerably behind flagship solutions like the Blackwell series. Despite these limitations, Trump hinted at the possibility of approving the sale of newer NVIDIA chips to China down the line, mentioning Blackwell as a potential future consideration.

It's worth noting that the Trump administration had previously halted sales of NVIDIA's H20 chips to China in April. However, the company announced last month that it had received approval to resume these shipments and anticipates commencing them soon. A U.S. official confirmed that the Department of Commerce has begun issuing licenses for H20 sales to China. This resumption has sparked debate among analysts and experts regarding its national security implications, especially given the potential threat posed by advanced AI technologies.

Market Repercussions and Future Uncertainties

The demand for the H20 chip in China remains robust, but this dynamic could shift dramatically as the nation's appetite for AI computing power grows. If Chinese companies find the H20's performance insufficient and lack access to top-tier GPUs, demand might pivot towards alternative suppliers or domestic AI chip development. NVIDIA garnered $17 billion in revenue from China in its last fiscal year, representing 13% of its total sales, while AMD reported $6.2 billion from China in its 2024 fiscal year, accounting for 24% of its global revenue. This significant revenue stream underscores the high stakes involved in these geopolitical tech maneuvers.

The long-term consequences of this unique revenue-sharing model and the strategically dampened chip exports are yet to unfold. However, it is clear that the intersection of national security, technological advancement, and international trade has become a primary battleground, with far-reaching implications for the global semiconductor industry and the future of artificial intelligence.