Nvidia and AMD have agreed to unusual deals granting the Trump administration a 15% cut of AI chip sales to China, deepening their ties with the U.S. government and raising questions about the future of tech export policies.
Article contents:
- Introduction: An unusual game-changing deal
- Deal details: Potential billions of dollars
- Jensen Huang’s charm offensive
- Paying for licenses: A new precedent
- The H20 chip: Tailored for China
- National security concerns and criticism
- Chinese reaction and alleged security risks
- Conclusion: A new chapter in the chip war
Introduction: An unusual game-changing deal
Nvidia and Advanced Micro Devices (AMD) have agreed to give the Trump administration a cut of their artificial intelligence chip sales to China in unusual agreements that deepen their ties with the U.S. government. This development comes amid ongoing trade negotiations between the United States and China, where semiconductors are one of Beijing’s top priorities and one of Washington’s most important leverage points.
Deal details: Potential billions of dollars
The Trump administration will receive 15% of sales as part of a deal to approve exports of Nvidia’s H20 AI chip to China, according to people familiar with the matter. This amount could reach billions of dollars given the demand for H20 chips, marking the latest example of the White House using new tactics to boost revenue. The administration reached the same agreement with AMD regarding its MI308 chip.
Jensen Huang’s charm offensive
The revenue agreement came after Nvidia CEO Jensen Huang met with President Trump on Wednesday, the same day it was announced that technology companies investing in the United States would be exempt from new chip tariffs. The Commerce Department began issuing licenses for Nvidia to ship the H20 chip to China on Friday, fulfilling a promise made in July that marked a major win for Huang. Huang had launched a charm offensive since his chip exports were halted in April, speaking with officials in both countries about the necessity of doing business with each other.
Paying for licenses: A new precedent
It is unusual for companies to essentially pay for export licenses. These agreements follow criticism from national security hawks who fear that chips and other technology will bolster China’s AI ecosystem and military. Nvidia says its chips are not being diverted to U.S. adversaries in large quantities. Administration officials say the H20 chip is not a top-performing chip and that they want Nvidia to compete globally with China’s Huawei.
The H20 chip: Tailored for China
Nvidia developed the H20 chip specifically for the Chinese market in 2023 after the Biden administration imposed export restrictions on more advanced AI chips. The chip uses the company’s Hopper architecture, which allows for tens of thousands of cores, and is less powerful than Nvidia’s latest series, known as Blackwell. The chip is not advanced enough to quickly train large language AI models, but it is useful for inference functions, the processes by which already-trained models draw conclusions from new data.
National security concerns and criticism
This deal represents a complex compromise. On one hand, it allows American companies to compete in the massive Chinese market. On the other hand, the U.S. administration is trying to mitigate security risks by approving the export of only less powerful chips. However, critics argue that any advanced technology exported to China can indirectly help enhance its military and technological capabilities.
Chinese reaction and alleged security risks
Chinese authorities have also raised concerns about the H20 chips, warning they are not eco-friendly and may carry security risks. Nvidia said this month that the chips do not contain so-called “backdoors” that would allow remote control or access. This mutual tension reflects how sensitive and important the semiconductor sector is in current international relations.
Conclusion: A new chapter in the chip war
This unprecedented deal is considered a new chapter in the ongoing chip war between the United States and China. It demonstrates how willing the U.S. administration is to use innovative financial and political tools to achieve its dual goals of boosting revenue and controlling the proliferation of sensitive technology. It remains to be seen whether this model will become mainstream and how it will affect the global technological balance in the long term.
