Nvidia and AMD have reportedly agreed to pay the U.S. government a 15% cut of their revenue from their specialized chip sales in China, in a deal so unconventional the business world is still reeling.
The arrangement, effectively a new kind of “export tax,” is an unprecedented move that ends a months-long blockade and reopens one of the world’s largest markets for America’s two most valuable chipmakers.
The news, first reported by the Financial Times, reveals the original and transactional tactics the Trump administration is deploying to generate revenue and control the flow of strategic technology. Nvidia and AMD chips are highly sought after by companies and governments to train their AI tools in the current AI race.
Why They Agreed to Pay
For Nvidia and AMD, agreeing to pay the government a portion of their profits was the lesser of two evils. Being completely locked out of the Chinese market was a financial catastrophe.
Nvidia had been hit particularly hard. After the administration blocked its China-specific chips in April, the company was forced to take a $4.5 billion charge for excess inventory it could no longer sell.
In May, it warned investors that the restrictions would cost the company an estimated $8 billion in revenue for the full fiscal year. Faced with losing billions, handing over 15% of future sales was a price they were willing to pay.
How We Got Here
The standoff is the latest chapter in the long-running U.S.-China tech war. The U.S. government has been trying to slow Beijing’s military advancement by blocking its access to high-end AI chips.
After the previous administration banned the sale of their most powerful processors, Nvidia and AMD cleverly designed special, less-powerful “compliance chips” — like Nvidia’s H2O and AMD’s MI308 — specifically for the Chinese market.
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