Nvidia and AMD, two of the world’s most influential chipmakers, have found themselves in an unprecedented arrangement with the U.S. government. Under a new deal, both companies are required to hand over 15% of their revenue from AI chip sales to China in exchange for export licenses. This is not just another tweak to trade rules; it is a major departure from the way export controls have historically worked. Traditionally, such measures are designed to safeguard national security or protect sensitive technologies, not to serve as a revenue stream for the government.
Why This Move Stands Out
The policy has surprised both the tech industry and legal experts. Export restrictions are typically blunt tools aimed at limiting the spread of strategic technology, but they do not usually involve the government taking a cut of sales. Some legal scholars are already questioning whether this arrangement could cross constitutional boundaries, particularly if it resembles an export tax without congressional approval. The fact that it blurs the line between security policy and financial leverage makes it a rare and controversial move.
From Ban to Bargain
The backstory makes the decision even more striking. In April, the Trump administration issued a firm ban on shipping advanced AI chips to China, singling out Nvidia’s H20 and AMD’s MI308 models. The justification was clear: these high-powered chips could give China an edge in developing artificial intelligence with potential military and surveillance applications. The ban was seen as part of a broader strategy to slow China’s technological rise.
But just a few months later, the situation shifted. By July, Nvidia and AMD were informed they could resume selling to China, provided they agreed to the 15 percent revenue arrangement. Reports suggest that Nvidia’s CEO, Jensen Huang, played a key role in reversing the ban, holding multiple high-level discussions with President Trump and Commerce Department officials. This fast pivot from outright prohibition to conditional approval underscores the complexity of balancing economic and security interests.
How the Companies Are Responding
Nvidia has said it is following U.S. rules and expressed hope that American-made AI infrastructure will remain the global standard, drawing lessons from how the U.S. lost ground in the 5G race. AMD has kept a lower profile, offering no significant public statements so far.
Market and Industry Impact
The stock market’s reaction was muted. Nvidia shares barely moved after the news broke, while AMD saw a modest one percent gain. Still, analysts see the agreement as risky. They warn it could accelerate China’s efforts to develop its own advanced chips, reducing reliance on American technology. If that happens, the U.S. could lose more ground in the long run.
The Bigger Picture
This deal signals a strategic shift in U.S. tech policy. It blends hardline competition with pragmatic compromise, ensuring domestic chipmakers can still profit from one of the world’s largest markets while the government retains leverage. Whether it becomes a one-off exception or a template for future deals remains to be seen. What is clear is that it marks a new chapter in how economic power, national security, and technological dominance are negotiated.
