In a rare move blending business and policy, Nvidia and AMD have agreed to hand over 15% of revenue from certain chip sales to China to the U.S. government. The arrangement applies to Nvidia’s H20 and AMD’s MI308 chips, with the revenue share tied directly to export licenses that allow these products into the Chinese market.
This decision comes after Washington previously blocked sales of Nvidia’s H20 chips to China earlier in the year. Recently, however, the Commerce Department began granting licenses for shipments—on the condition that a portion of the revenue is returned to the U.S. Nvidia had anticipated the approval process and confirmed that applications were in progress, with officials acknowledging the move late last week.
The requirement is an unusual step for any administration, amounting to a direct condition on corporate market access rather than a traditional tariff or tax. Officials have yet to reveal when the levy will begin, how it will be collected, or how the funds will be used. The Financial Times first reported the details, noting it as part of a broader negotiation strategy.
A Strategic Trade Play
Commerce Secretary Howard Lutnick framed the arrangement as one element of a larger trade package that also involves rare earth minerals. He emphasized that China will not gain access to Nvidia’s most advanced chips, calling the H20 only the company’s “fourth-best” model. The goal, he suggested, is to keep China reliant on U.S. hardware and software without closing the door on sales altogether.
The thinking within the administration is straightforward: limiting China to mid-tier chips keeps them within a U.S.-influenced ecosystem, even if they can’t purchase the most powerful systems. For Nvidia, maintaining a foothold in the Chinese market is seen as critical to staying competitive and avoiding a full pivot by Chinese firms to domestic alternatives.
What will be the impact on market and business
Industry analysts say the revenue share could trim product margins by 5 to 15 percentage points, with a smaller but still noticeable effect on overall profits. The news weighed on both companies’ stock prices in early trading, as investors considered the earnings impact and the precedent such a deal might set.
Despite the margin hit, the market is too large for either company to walk away. In its last fiscal year, Nvidia earned around $17 billion from China—about 13% of its total revenue—while AMD reported $6.2 billion from China, or roughly 24% of sales. Nvidia previously warned that missing out on H20 sales could have cost billions in quarterly revenue, raising the stakes for securing these licenses.
Not everyone is on board with the approach. Some policy experts question whether the move sends mixed signals: if the chips are safe to sell, why penalize the companies; if they’re risky, why sell them at all? Others worry that the revenue skim could grow over time, creating uncertainty for long-term corporate planning. Lawmakers have also pressed the administration on whether resuming shipments aligns with earlier export-control goals.
