Two American AI companies have agreed to hand over 15 percent of their chip sales revenue in China to the US government in exchange for export licenses, sources have revealed.
Nvidia and Advanced Micro Devices (AMD) entered an unprecedented arrangement with the White House to promote and sell their semiconductors in China last week, three people familiar with the situation told the Financial Times.
The AI giants secured licensing specifically for Nvidia’s H20 and AMD’s MI308 chips, both specifically designed to comply with US export restrictions.
Trump told Nvidia it could sell the H20 AI chip in China last month after opposing the idea, but he never went through with the licensing to make those sales feasible.
Meanwhile, Trump had barred AMD from selling the MI308 chip in China.
The CEO of Nvidia, Jensen Huang, met with Donald Trump last week to review the bizarre deal, according to sources, including a US government official.
The Commerce Department allegedly started issuing licenses for the semiconductors just two days later.
Two of the anonymous sources told the outlet that Trump has not decided what the money will be used for.
The CEO of Nvidia, Jensen Huang (right), met with Donald Trump (left) last week to review the bizarre deal, according to sources, including a US government official
Trump had barred AMD from selling the MI308 chip in China before entering last weeks agreement
But the deal could pour more than $2 billion into the US government, The New York Times reported.
AMD has not responded to the Financial Times’ request for comment, but Nvidia did issue a vague statement on the matter.
The $4.4 trillion company wrote: ‘We follow rules the US government sets for our participation in worldwide markets.’
While AMD CEO Lisa Su had not directly addressed the 15 percent revenue agreement, she spoke about the $280 billion company’s place in China last week.
She told Bloomberg Television that Trump-imposed trade restrictions with China should not deter investors.
‘We are seeing a lot of positive signals over the last 90 days in terms of what the market needs from computing,’ she told the outlet.
‘We have a number of licenses under review, and we’ve been given good indications those are moving through the process.’
Just as sources say Trump and the AI companies entered the agreement, the president declared he would impose a 100 percent tariff on the imports of semiconductors and chips unless the company is ‘building in the United States.’
While AMD CEO Lisa Su (pictured) had not directly addressed the 15 percent revenue agreement, she spoke about the $280 billion company’s place in China last week
Trump told Nvidia it could sell the H20 AI chip in China last month after opposing the idea, but he never went through with the licensing to make those sales feasible
Amid Trump’s tariff crackdown, he has been issuing hefty tariffs on other countries – with China facing the majority of the brunt – to encourage domestic production.
News of Trump’s discreetly entered agreement with Nvidia and AMD has been slammed by experts who say the move could have detrimental repercussions when it comes to US-China relations.
‘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, 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.’
The move to sell microchips to China has been heavily criticized, as many see it as a threat to national security and a move against America’s best interests.
US security experts said the H20 in particular will aid the Chinese military efforts and boast China in its AI development race against the US.
Nvidia’s devices are generally regarded as better quality than those of its Chinese-made counterpart, Huawei.
But the Trump administration has said it will not allow China to purchase Nvidia’s most powerful chips.
US security experts said Nvidia’s H20 in particular will aid the Chinese military efforts and boast China in its AI development race against the US
Despite these massive wins for Nvidia and AMD, the Chinese government has actually warned citizens that the H20 has security risks (pictured: President Xi Jinping
The H20 chip was approved under the Biden administration and lacks the capabilities of chips sold within the US and to allied nations.
‘We don’t sell them our best stuff, not our second-best stuff, not even our third best,’ Howard Lutnick, the Commerce Secretary, told CNBC last month.
Huang convinced Trump to let up on his previously established boundaries by arguing that not allowing American companies to compete in the Chinese market would be harmful to the US, according to The New York Times.
‘The American tech stack should be the global standard, just as the American dollar is the standard by which every country builds on,’ Huang said last month during a podcast with think tank the Special Competitive Studies Project.
Despite these massive wins for Nvidia and AMD, the Chinese government has actually warned citizens that the H20 has security risks.
The Cyberspace Administration of China summoned Huang over possible ‘backdoor security risks’ with the H20.
‘There is no such thing as a ‘good’ secret backdoor — only dangerous vulnerabilities that need to be eliminated,’ Nvidia disputed in a blog post.
