Nvidia and AMD Strike Historic China Revenue Sharing Agreement

In a move few could have anticipated, Nvidia Corp (NVDA:US) and Advanced Micro Devices (AMD:US) have secured U.S. export licenses to resume sales of advanced AI chips, the H20 and MI308, to China. In return, both companies will pay 15% of their Chinese sales revenue to the U.S. government as part of the agreement

President Trump personally negotiated the deal, initially seeking a 20% cut, eventually settling at 15% after discussions with Nvidia CEO Jensen Huang

Navigating the Chips Trade U-Turn

Export restrictions on these chips initially stemmed from deep security concerns. However, high-level negotiations, particularly between Huang and Trump, prompted a dramatic policy reversal. Just days after Huang’s White House visit, license approvals were granted for both Nvidia and AMD chips 

Nvidia’s H20 chip, while not its most powerful, is strategically important. The MI308, AMD’s counterpart, was also developed to meet U.S. compliance requirements. Both firms suffered significant projected revenue losses, Nvidia’s in the billion-dollar range and AMD's around $800 million, due to the earlier export curbs

Market Reaction and Strategic Effects

Wall Street cheered: Nvidia and AMD shares both rallied as investors anticipated strong revenue resumption from the Chinese market 

Analysts expect Nvidia could earn up to $8 billion from renewed H20 chip sales, while the U.S. government’s 15% share might bring in billions, possibly around $7.5 billion, though some put the figure at about half that.

A Divisive Deal

The agreement has ignited controversy. Critics argue that it effectively functions as an unconstitutional export tax, bypassing established security frameworks in favor of revenue generation.

Even as Nvidia downplays security risks as “misguided,” lawmakers remain skeptical, warning that these chips, while not top-tier, can still accelerate China’s AI and military capabilities 

Implications for U.S.–China Tech Dynamics

This deal reflects a broader trend: leveraging access to AI hardware in international relations. Part of a wider trade negotiation, the chip export allowance is tied to rare-earth material deals, critical for U.S. manufacturers

But the move may have longer-term consequences. While the U.S. gains financially, China’s push for semiconductor self-sufficiency continues, raising questions about the enduring strategic benefit of this reopening 

Final Word

In striking this unprecedented agreement, Nvidia and AMD have reopened the lucrative Chinese AI chip market, with a steep price tag. The path forward remains tenuous: balancing economic returns, national security concerns, and the shifting dynamics of global semiconductor power.