US to Take a Cut of Advanced Chip Sales to China by Nvidia and AMD

The agreements were negotiated directly between the companies and President Trump, bypassing Congress, and followed shortly after Nvidia CEO Jensen Huang met with the president at the White House. The deals apply to Nvidia’s H20 chips and AMD’s MI308 processors.

China quickly reciprocated the move to lift the restrictions on advanced chips by allowing a $35 billion deal involving U.S. software makers to go through after blocking it for the past year, the Wall Street Journal reported. Chinese officials also froze an inquiry into an already-completed Nvidia deal.

Still, the deals surprised many in Washington, according to multiple reports, as it would seem to cut against the grain of the Trump administration’s own policy of ensuring the U.S. maintains its technological edge in AI over rivals, particularly China.

“This is an own goal and will incentivize the Chinese to up their game and pressure the administration for more concessions,” Liza Tobin, who previously served as China director at the National Security Council during the Trump and Biden administrations told the New York Times.  “This is the Trump playbook applied in exactly the wrong domain. You’re selling our national security for corporate profits.”

Per the Journal, Democrats in the Senate Intelligence Committee wrote Commerce Secretary Howard Lutnick last week, before the 15% U.S. cut was unveiled, to express their “grave concern with the administration’s sudden and inexplicable decision,” to allow the sales. “A cornerstone of U.S artificial intelligence strategy for years has been to protect America’s advantage in AI computing capability and access to leading-edge hardware, compared to the PRC and other key adversaries,” the letter said. “The PRC seeks to use AI to strengthen its military systems like hypersonics, as well as its communications, surveillance, battlefield decision-making processes. In parallel, the PRC has sought to shape commercial AI ecosystems – in ways that cultivate foreign dependency on PRC technology, posing long-term counter-intelligence and competitiveness risks to the United States.”

Related: House Panel Flags DeepSeek as Threat, Eyes Nvidia Sales

Although the U.S. Constitution bars the levying of export taxes, Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told The Hill it is unclear whether the 15% of revenues would qualify as taxes because “it looks like the companies just decided to make this payment in order to further their business.”

Federal law expressly prohibits payments for export licenses, which could trigger legal challenges to the deals. But according to other experts cited by The Hill it’s unclear who, apart from Congress, would have standing to challenge them.

According to a long behind-the-scenes account in the Wall Street Journal of how the deals came about, Huang was able to persuade Trump that continuing the export ban would only benefit China’s chip giant Huawei and would encourage Beijing to accelerate China’s development of its own AI technology stack.

Huang also promised Trump Nvidia would invest as much as $500 billion in AI infrastructure in the U.S., per the Journal.

According to the Times, the deal could funnel $2 billion to the U.S. government. Citing Bernstein Research, it said Nvidia was expected to sell more than $15 billion worth of its H20 chip to China through the end of the year, while AMD was expected to sell $800 million.

Left unclear is how that money will be used. There is little precedent for such an arrangement and no established procedures for how such fees are to be collected. Both the White House and Commerce Department declined to comment, per the Times.