Nvidia and AMD to Pay 15% of China AI Chip Sales to the US in Unprecedented Deal
Nvidia and AMD, leaders in the AI chip industry, have reached a surprising new agreement. Under this agreement, they will pay 15% of their AI chip sales made in China back to the United States. This action is unprecedented and occurs amid rising tensions between the US and China, particularly in the area of technology trade. The deal aims to control the flow of advanced AI technology and protect US interests. But it also raises many questions about how it will affect the companies, the Chinese market, and the global tech race. We will explore what this deal means, why it matters, and how it might shape the future of AI chips worldwide.
Background and Context
Nvidia and AMD are leaders in the AI chip market, supplying critical hardware for applications ranging from data centers to autonomous vehicles. China represents a significant market for these companies, with Nvidia earning approximately $17 billion (13% of revenue) and AMD about $6.2 billion (24% of revenue) from sales in the region in recent fiscal years.
The U.S.-China tech rivalry has intensified in recent years, with the U.S. imposing export controls on advanced semiconductor technologies to limit China’s access to cutting-edge AI capabilities. However, the latest deal introduces a new dimension to this strategy, intertwining economic interests with national security considerations.
Details of the Deal
The deal obliges Nvidia and AMD to hand over 15% of their AI chip sales revenue from China to the U.S. government. This arrangement was reportedly a condition for receiving export licenses, after the Trump administration previously halted such sales in April 2025. The U.S. Commerce Department has since resumed issuing licenses, enabling Nvidia and AMD to resume shipments.
Nvidia’s H20 chip, designed for AI inference tasks, and AMD’s MI308 chip are central to this deal. These chips are not as powerful as their predecessors, which were subject to stricter export controls, but they still offer significant capabilities for AI applications in China.
Impact on Nvidia and AMD
From a financial perspective, this agreement may significantly impact Nvidia and AMD. While the exact revenue figures are not publicly disclosed, the 15% payment represents a significant portion of their earnings from the Chinese market. For Nvidia, which generated $17 billion from China, this could amount to over $2.5 billion in payments. For AMD, with $6.2 billion in Chinese revenue, the payment could exceed $900 million.
The arrangement may also affect their pricing strategies and competitiveness in the Chinese market. To maintain margins, both companies might consider adjusting their pricing structures, potentially making their products less attractive to Chinese customers.
Strategically, Nvidia and AMD may need to reassess their global operations and market strategies. The deal could prompt them to explore alternative markets or adjust their product offerings to mitigate the financial impact of the payments.
Impact on the China AI Market
For China, this deal represents a complex development. On one hand, access to advanced AI chips like the H20 and MI308 could bolster China’s AI capabilities. Conversely, the 15% payment to the U.S. government could be perceived as a form of economic leverage, potentially straining U.S.-China relations further.
Chinese regulators have expressed concerns over environmental and security risks associated with these chips. However, Nvidia has denied the presence of any remote-access “backdoors,” aiming to alleviate these concerns.
This development may also accelerate China’s efforts to develop domestic AI chip technologies, reducing reliance on foreign suppliers and enhancing its technological sovereignty.
Broader Geopolitical and Economic Implications
This deal underscores the growing intersection of technology, economics, and national security in global trade. By linking export licenses to financial contributions, the U.S. government introduces a new model of economic diplomacy that could influence future trade negotiations and international relations.
The arrangement may prompt other countries to reconsider their policies on technology exports and economic partnerships, potentially leading to a reevaluation of global supply chains and trade agreements.
Additionally, the deal could set a precedent for other tech sectors, where national security concerns are increasingly influencing market dynamics.
Conclusion
Nvidia, AMD, and the U.S. reached an agreement to share 15% of revenue. This agreement represents a major change in global technology trade. While it offers economic benefits to the U.S., it also introduces new complexities for the companies involved and the broader international community. As this arrangement unfolds, it will be crucial to monitor its impact on market dynamics, international relations, and the future of global technology trade.
FAQS:
Yes, the US government ordered Nvidia to stop selling its most advanced AI chips to China. This was done to control technology access and protect national security.
About 13% of Nvidia’s total sales come from China. This makes China one of Nvidia’s important markets for its AI chips and other products.
Nvidia can’t sell some chips to China because of US export rules. These rules aim to limit China’s access to powerful technology for security reasons.
Disclaimer:
This content is for informational purposes only and not financial advice. Always conduct your research.