A 15% price tag for doing business in China
In a move that’s as surprising as it is historic, Nvidia and AMD have reportedly agreed to hand over 15% of their Chinese chip revenues to the U.S. government. The reason? To secure export licences that will let them sell advanced chips to China, a market worth billions.
It’s a deal that blends tech ambition with political tension, and some are calling it “unprecedented.” But why would two of the world’s biggest chipmakers agree to such terms? The answer lies in a messy mix of national security concerns, trade restrictions, and the high stakes of the global AI race.
The chips at the center of the storm
For Nvidia, the chip in question is the H20—designed specifically for the Chinese market after the Biden administration’s 2023 export restrictions. For AMD, it’s the MI308.
These aren’t your everyday computer chips. They’re AI accelerators, capable of powering everything from advanced data centres to—as critics warn — military applications like autonomous weapons, surveillance platforms, and battlefield decision-making tools.
The Trump administration banned sales of Nvidia’s H20 to China in April this year, citing national security risks. Now, with the new 15% payment agreement, those sales could resume — but not without controversy.
National security or national revenue?
Critics argue the deal sends mixed messages. If these chips are truly a security threat, why allow them to be sold at all — even with a revenue cut?
“You either have a national security problem or you don’t,” said Deborah Elms of the Hinrich Foundation. “If you have a 15% payment, it doesn’t somehow eliminate the national security issue.”
A group of 20 U.S. security experts echoed this concern in a letter to Commerce Secretary Howard Lutnick, warning that while most buyers in China might be civilian companies, the Chinese military could still benefit from the technology.
Nvidia and AMD’s calculated gamble
From the companies’ perspective, the Chinese market is simply too big to ignore. Nvidia’s CEO Jensen Huang has spent months lobbying both Beijing and Washington, even meeting with President Donald Trump last week, to find a way back into China.
Nvidia told the BBC: “We follow the rules the U.S. government sets for our participation in worldwide markets. While we haven’t shipped H2O to China for months, we hope export control rules will let America compete in China and worldwide.”
For AMD, which has been quieter publicly, the move is likely just as strategic. With AI demand booming, securing a slice of China’s market could mean billions in revenue — even with the 15% haircut.
Beijing’s reaction: “bullying”
China’s Ministry of Foreign Affairs wasted no time criticising Washington, accusing the U.S. of “abusing export control measures and engaging in unilateral bullying.”
Beijing has long argued that U.S. chip restrictions are less about security and more about maintaining America’s tech dominance. This latest revenue-sharing requirement will likely be framed in China as another example of economic coercion.
Why this deal is a first
Analysts say there’s no modern precedent for a foreign sales “tax” like this, especially tied to national security export licences.
Charlie Dai, vice president at Forrester Research, called it “unprecedented”, adding, “The arrangement underscores the high cost of market access amid escalating tech trade tensions, creating substantial financial pressure and strategic uncertainty for tech vendors.”
In other words, this isn’t just a policy experiment—it could become a template for future tech trade compromises, especially in sensitive sectors like AI, quantum computing, and advanced semiconductors.
A backdrop of trade tensions
This chip deal doesn’t exist in isolation. It’s happening during a fragile moment in U.S.–China trade relations.
Recently, Beijing has eased restrictions on rare earth exports, while Washington has loosened certain rules for chip design software firms in China. The two countries even agreed to a 90-day truce in their tariff war in May, though that pause could expire on August 12 without an extension.
Behind the scenes, both sides are still manoeuvring for advantage. Trump’s administration has been pushing U.S. tech companies to invest more at home. Apple has pledged $100 billion in new U.S. investments, and Micron Technology is planning $200 billion worth of projects, including a huge facility in Idaho.
Nvidia, for its part, has promised up to $500 billion for U.S.-based AI infrastructure, including what it claims will be the first entirely American-made AI supercomputers.
The intel twist
In a side drama, Intel’s CEO Lip-Bu Tan has faced public criticism from Trump over alleged ties to China. The president even called for his resignation, accusing him of having “highly conflicted” interests — something Tan has dismissed as “misinformation”. Reports suggest Tan may soon meet with Trump at the White House to address the matter.
The bigger picture: AI leadership at stake
Nvidia argues that allowing some level of chip exports is crucial to America’s global AI leadership. “America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race,” the company said in a statement.
In other words, if U.S. companies are shut out of China completely, Chinese firms might turn to domestic alternatives — and America could lose influence over global AI standards.
This is an hour-long video, but you see the bigger picture:
What does this mean going forward
This 15% deal is a high-wire act. For Washington, it’s a way to keep tabs on sales, generate revenue, and maintain some control over exports. For Nvidia and AMD, it’s a compromise that keeps the Chinese market (and its billions) in play.
But the deal doesn’t erase the underlying tension. National security hawks still worry about military applications. Chinese officials still see it as bullying. And tech companies are still left navigating the most complicated geopolitical chess game in decades.
If this arrangement succeeds, we could see similar deals for other restricted tech products. If it fails — whether due to politics, security incidents, or market backlash — it could harden the divide between the world’s two biggest tech powers.
For now, though, one thing’s clear: in the high-stakes world of AI chips, every percentage point — and every political handshake — comes with a price.
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