U.S. to Claim a Portion of China's Chip Sales Revenue, Causing a Decline in Nvidia's Pre-market Shares
In a groundbreaking development, technology giants Nvidia and AMD have agreed to pay 15% of their revenue from the sales of certain AI chips in China directly to the U.S. government. This agreement was reached under President Donald Trump's administration as a new approach to managing chip exports to China [1].
The deal allows for limited sales of Nvidia’s H20 accelerator chips and AMD’s MI308 processors, which are designed to comply with U.S. export controls, while providing financial revenue for the U.S. government. The collected funds are intended to pay down the U.S. national debt, with potential for distribution to taxpayers if successful [1].
Key details of the deal include:
- Revenue Sharing: Nvidia and AMD contribute 15% of their sales revenue from these specific AI chips sold in China back to the U.S. Treasury.
- Export Control Compliance: The chips involved are designed to meet U.S. export control requirements to allow legal sales to China.
- Purpose of Revenue: The collected funds are intended to pay down the U.S. national debt, with potential for distribution to taxpayers if successful [1].
- Strategic Context: This deal represents a shift from previous outright bans on advanced chip sales to China towards a controlled revenue-sharing model that still provides economic leverage to the U.S.
- Global Impact: The deal affects the broader semiconductor supply chain, which involves global companies like Taiwan’s TSMC (chip manufacturing), the Netherlands’ ASML (chipmaking tools), and others. It marks a unique precedent with potential implications for other industries and countries [2].
This negotiation is seen as innovative but controversial because it replaces strict export bans with a partial revenue capture model, balancing trade restrictions with financial gain for the U.S. [1][2].
According to reports, Nvidia hasn't shipped H20 to China for months [3]. AMD, on the other hand, has reported a $800 million write-off due to restrictions on the exports of its MI308 chips to China [4]. The 15% cut also applies to the revenue generated from the sale of AMD's MI308 chip in China. However, the exact amount of revenue the companies will pay to the U.S. government has not been specified [5].
In premarket trading, Nvidia’s shares dropped 1.16% to $180.61, while AMD’s slipped 2.3% to $168.79 [6]. The deal was a necessary condition for the export licenses granted to the companies last week [7]. The Financial Times first reported on this matter, but did not specify the source of the unnamed officials [8][9].
The report did not specify the source of the unnamed U.S. official and others familiar with discussions [8][9]. This development is expected to have significant implications for the tech industry and U.S.-China relations.
[1] Financial Times [2] Reuters [3] CNBC [4] The Wall Street Journal [5] Bloomberg [6] MarketWatch [7] Reuters [8] Financial Times [9] Bloomberg
- The agreement between Nvidia and AMD stipulates that a proportion of their revenue from the sales of specific AI chips, such as Nvidia's H20 accelerator chips and AMD's MI308 processors, in China will be allocated towards paying down the U.S. national debt, with potential for distribution to taxpayers if successful.
- The financial sector is closely watching the revenue generated from the sale of these AI chips, as Nvidia and AMD are required to contribute 15% of this revenue to the U.S. Treasury, due to the recently negotiated agreement concerning AI chip exports to China.
