The agreement, first reported by the Financial Times, was described by one U.S. official on Sunday as a condition for the companies to obtain export licenses for their latest artificial intelligence semiconductors, including Nvidia’s H20 and AMD’s MI308 chips.
The Trump administration had halted sales of the H20 to China in April over export control concerns but gave Nvidia the green light last month to resume shipments. The U.S. Commerce Department began issuing licenses on Friday, paving the way for deliveries to restart.
A Highly Unusual Levy
Such a revenue-sharing arrangement is unprecedented for a U.S. president, marking the latest in a string of direct interventions by Donald Trump in corporate decision-making. The administration says the deal does not compromise national security, even though it applies only to high-end AI chips that had previously been subject to curbs.
“This is wild,” said Geoff Gertz, a senior fellow at the Center for New American Security. “Either selling H20 chips to China is a national security risk, in which case we shouldn’t be doing it, or it’s not, in which case why are we putting this extra penalty on the sale?”
Commerce Secretary Howard Lutnick has described the H20 as Nvidia’s “fourth-best chip” and argued it was in U.S. interests for Chinese firms to keep using American technology stacks—even if the most advanced versions remain banned.
Industry Impact
Nvidia warned earlier this year that losing the Chinese market for its H20 chips could cost it $8 billion in sales for the July quarter. AMD projected a $1.5 billion hit for 2024 from export restrictions. Both companies rely heavily on China, which accounted for 13% of Nvidia’s total revenue ($17 billion) and 24% of AMD’s ($6.2 billion) in their latest fiscal years.
Analysts say the levy will compress gross margins for these chips by 5 to 15 percentage points, translating to roughly a one-point hit to overall margins. Shares in Nvidia fell about 1% in premarket trading on Monday, while AMD dropped nearly 2%.
“The Chinese market is significant for both these companies, so even if they have to give up a bit of the money they would otherwise make, it looks like a logical move on paper,” said Russ Mould, investment director at AJ Bell. “That said, it is unprecedented and there is always the risk the revenue take could be upped—or that the Trump administration changes its mind and reimposes export controls.”
Political and Diplomatic Reactions
The move has sparked criticism from both security and trade policy circles. Former Commerce Department adviser Alasdair Phillips-Robins, who served under the Biden administration, said:
“If this reporting is accurate, it suggests the administration is trading away national security protections for revenue for the Treasury.”
China’s foreign ministry repeated its longstanding position that U.S. export restrictions are part of a campaign to “maliciously contain and suppress” China.
The Trump administration has not yet determined how to use the funds generated from the levy. The timeline for implementation and the precise mechanisms for collection also remain unclear.
For now, the deal underscores a new phase in U.S.-China tech relations—one where export controls, corporate strategy, and government revenue interests are becoming increasingly intertwined.