Two prominent U.S. chip manufacturers, Nvidia and AMD, have entered into an unusual agreement with the federal government, agreeing to share a portion of their revenue from chip sales. This arrangement involves sharing some revenue from sales to China and has raised questions about constitutional implications and the establishment of new precedents.
The companies will each contribute 15% of the revenue generated from selling advanced artificial intelligence (AI) chips to China, following a few months of export license suspension confirmed just recently.
“It’s quite strange and, honestly, concerning because Congress hasn’t had any input on this,” remarked Gary Huhhbauer, a senior fellow at the Peterson Institute for International Economics.
“It’s just a negotiation between the president and these individual companies, which isn’t really how we’ve done things historically in the U.S.,” he added.
The agreement specifies that NVIDIA will share 15% of its revenue from H20 chip sales to China, while AMD will do the same for its Mi308 chip sales.
These GPUs are designed for the Chinese market, keeping U.S. export controls in mind. However, back in April, new restrictions imposed by the Trump administration effectively prohibited sales to China.
Last month, Nvidia and AMD stated they had received assurances from the U.S. government regarding the approval of export licenses for their H20 and MI308 chips, though sources indicated that the Department of Commerce took several weeks to actually begin issuing those licenses.
According to Bloomberg, the revenue-sharing agreement emerged after Nvidia CEO Jensen Huang met with President Trump at the White House last week. Huang faces a challenging balancing act, trying to navigate the interests of both Washington and Beijing amid the ongoing competition for AI dominance.
“We will adhere to the rules set by the U.S. government for competing in the global marketplace,” said an Nvidia spokesperson. “We haven’t shipped H20 to China in months, but we hope that the line on export control will enable us to compete globally.”
“The U.S. cannot afford to lose its leadership in communications technology by repeating past mistakes with 5G,” they stressed. “The American AI tech framework has the potential to set global standards if we push forward.”
Nvidia currently leads the GPU market, which fuels the AI surge, contributing to its rapid growth in recent years. Just last month, it became the first company worldwide to hit a market capitalization of $4 trillion.
While AMD remains important, it commands a far smaller share of the market.
This agreement seems to clear significant hurdles for the two corporations. Earlier this year, Nvidia pointed to a $4.5 billion cost associated with CHIP restrictions in the first quarter and projected $8 billion in sales for the second quarter. Meanwhile, AMD anticipates a $1.5 billion revenue hit this year.
This shift signifies a new approach from the government towards export control matters.
“It transforms government export control actions into a revenue-generating proposal, which is unprecedented,” noted one expert.
The U.S. government is barred from imposing taxes on exports by both constitutional and federal law.
“There are policy implications in the arrangement with Nvidia and AMD, as well as the claim for a 15% revenue cut for selling advanced chips in China—the Constitution utterly forbids export taxes,” one expert explained.
It remains uncertain whether the 15% share from Nvidia and AMD would qualify as an export tax; some view this as a voluntary payment the companies opted to make to support their business endeavors.
Additionally, it’s not clear who might challenge these developments legally. Huffbauer hinted that such challenges are unlikely.
Nevertheless, agreements involving NVIDIA and AMD could encounter resistance.
Concerns are rising among both Democrats and Republicans about the Trump administration allowing Nvidia to resume H20 sales to China, as they worry it could enhance Beijing’s AI capabilities.
Commerce Secretary Howard Lutnick insisted the administration is only permitting the sale of “fourth-best” chips to China, an approach that seems supported within the semiconductor industry. This is intended to help chipmakers sell several chips to China, preventing companies like Huawei from gaining a competitive edge.
However, the latest decision raises fresh concerns.
“Many national security-focused individuals are questioning whether we are now selling export control licenses. Can we buy a license to sell more advanced chips than Nvidia?” asked Owen Tedford, a senior research analyst at Beacon Policy Advisors.
Stacy Rasgon, a senior analyst at Bernstein Research, noted that accepting a 15% cut might make sense since Nvidia and AMD’s offerings greatly surpass others available in the market.
Still, he expressed concern, stating, “It feels like a slippery slope. Where does it end? Is it just Chinese AI today? What about other items in the future under export controls? That’s why those controls exist in the first place.”
The transaction could set a “template” for other companies facing export restrictions, Tedford suggested.
“It’s somewhat unique to have happened under Trump’s administration,” he added. “Whether we see similar dynamics in a Biden or Harris administration, or with the ongoing fluctuations of these H20 chips, reflects Trump’s typical dealings, showcasing his desire for a kind of victory.”
“It evokes broader concerns about the Trump administration—this feels as if it’s been crafted as a sales pitch related to policy outcomes,” Tedford concluded. “If a company is substantial enough, it seems like it can essentially purchase the policy it seeks from the Trump administration.”
