U.S. imposes 15% tax on AI chip sales by Nvidia and AMD in China
In a groundbreaking move, Nvidia and AMD have agreed to pay a 15% tax on their revenues from AI chip sales in China to the US government. This deal, which allows the tech giants to sell their H20 and MI308 chips in China under US export controls, marks a significant blend of trade controls, national security, and direct government revenue participation [1][2].
Under this arrangement, Nvidia and AMD will be able to continue selling their chips in China, preserving a critical market, while also providing a direct source of revenue to the US government. The agreement comes as a result of new restrictions, avoiding a near-total ban on their China sales [1][2].
The deal has raised several questions and concerns. Legal experts question whether this constitutes an unconstitutional export tax, as the US Constitution prohibits duties on exports, casting doubts on its legality [3][5].
The agreement reflects the ongoing tech rivalry and geopolitical tension between the US and China over cutting-edge technology sectors like AI chips. It allows the US to maintain some leverage and benefit economically despite restricting advanced tech exports to China [1][2][4].
The implications for Nvidia, AMD, and the tech industry are substantial. The financial impact could potentially affect corporate earnings and stock valuations, as paying 15% of China sales revenue to the US reduces profitability from one of the world's biggest markets [1][2].
Strategic adjustments will be necessary for chipmakers, as they navigate complex compliance with US national security measures and export rules, while balancing access to China with revenue sharing and governance oversight [1][2].
The novel form of government involvement could redefine how global tech firms approach international markets subject to geopolitical trade restrictions, potentially increasing trade costs and complicating supply chains [1][2].
The constitutional questions surrounding the arrangement could trigger legal challenges that impact future US export control policies and revenue-sharing models [3][5].
Beijing is unlikely to warm to the idea of a chip tax on Chinese AI chips. Critics argue that the arrangement risks invalidating the national security rationale for US export controls [6].
Allies may not believe US policymakers if they are willing to trade away national security concerns for economic concessions. If Nvidia can return to the level of $7 billion in H20 sales to China, the US government will stand to get about a billion dollars a quarter from the deal [1][2].
The hurdle for chips entering China may deter Nvidia and AMD from deeper expansion in the world's largest chip-importing market, potentially giving local Chinese producers a clear edge [1][2].
The Financial Times reported the development regarding the agreement between Nvidia and AMD to pay a portion of their revenues from Chinese AI chip sales to the US government [7]. The Commerce Department has begun issuing H20 licenses following a meeting between Nvidia chief executive Jensen Huang and President Donald Trump [8]. AMD will deliver the same share from MI308 revenues [8].
This deal underscores the high stakes in US-China tech competition and may reshape export policies and global semiconductor market dynamics, though its legal standing remains uncertain [1][2][3][4][5].
References:
- Reuters
- The Wall Street Journal
- The Hill
- Bloomberg
- The Washington Post
- CNBC
- The Financial Times
- CNBC
The financial impacts for Nvidia and AMD, as they pay 15% of their China sales revenue to the US government, could significantly affect corporate earnings and stock valuations, potentially reducing profitability from one of the world's largest markets. This novel form of government involvement in technology sales could also redefine how global tech firms approach international markets subject to geopolitical trade restrictions, potentially increasing trade costs and complicating supply chains.
