August 11, 2025 — New York: In a move set to reshape global technology trade, the United States government has brokered an unusual deal granting it 15% of revenue from Nvidia and AMD’s semiconductor sales to China, as the two U.S. chip makers regain permission to export certain advanced AI chips to the world’s second-largest economy.

The agreement, confirmed Monday in a White House press conference by President Donald Trump, follows a period of tightened export controls initiated in April that barred the shipment of key chips to Chinese firms over national security fears.

‘Old Chips’ and High Stakes Negotiations

Nvidia and AMD, two of the world’s leading developers of AI processors, have been at the center of a high-stakes tug-of-war between Washington and Beijing. In April, the U.S. Commerce Department further escalated restrictions on the export of cutting-edge chips used in artificial intelligence and high-performance computing, citing concerns that these technologies might bolster China’s military and surveillance capacities.

By July, with extensive lobbying from American semiconductor leaders, the U.S. signaled it would grant export licenses for certain chips considered less strategically sensitive. Chief among them are Nvidia’s H20 GPU and AMD’s MI308 accelerator, both of which are critical for AI model training but are not the latest generation available to U.S. entities.

President Trump acknowledged the saga’s unconventional resolution, stating, “So we negotiated a little deal. He’s selling a basically old chip,” referring to talks with Nvidia CEO Jensen Huang. According to Trump, US negotiators initially sought a 20% share of revenue from these exports, ultimately settling at 15% after direct discussions with Huang.

Industry and Political Reaction

The deal has drawn sharp responses across Washington and the U.S. business community. Proponents view the arrangement as a pragmatic balance: allowing American firms access to a crucial market, while simultaneously providing resources for government oversight and security initiatives. China accounted for approximately 17-20% of Nvidia’s data center revenue as recently as 2023, illustrating the stakes for U.S. chip firms as Beijing accelerates domestic alternatives.

However, critics warn the agreement risks violating constitutional prohibitions on export taxes and undermining the spirit of national security-focused export controls. “Our export control regime must be based on genuine security considerations, not creative taxation schemes,” said Rep. Raja Krishnamoorthi (D-IL), ranking member of the House Select Committee on China. He signaled plans to investigate the deal’s legal basis and its implications for long-term U.S. security interests.

Derek Scissors, a senior fellow at the American Enterprise Institute, echoed constitutional concerns, saying, “There’s no precedent for this. A 15% ‘fee’ on export revenue is essentially a tax. I don’t think this arrangement is durable.”

Strategic Context: Technology, Trade, and Geopolitics

The U.S.-China competition for semiconductor and AI supremacy has defined technology and trade debates throughout the 2020s. In 2022 and 2023, Washington implemented increasingly strict controls on equipment and software for advanced chipmaking in China, aiming to slow Beijing’s progress in fields like AI, machine vision, and quantum computing.

Industry leaders such as Nvidia have stressed that blanket restrictions could cost American firms more than $5 billion annually and accelerate Chinese efforts to create “homegrown” AI semiconductors. In fact, since tighter restrictions in 2023, several new Chinese chip startups have emerged, and state-backed entities, including DeepSeek and Huawei, have ramped up their own AI offerings.

Commerce Secretary Howard Lutnick told CNBC in July that renewed Nvidia chip sales in China were made possible by a broader trade accord involving rare-earth magnets—materials essential for a range of tech products and electric vehicles.

The new deal also comes just days after President Trump extended a 90-day truce on additional tariffs against China, keeping the economic relationship in a delicate balance amid ongoing negotiations.

Export Controls, National Security, and Industry Risks

Supporters of stricter export controls, including some in Pentagon and national security circles, argue that such measures are vital to ensuring long-term U.S. leadership in artificial intelligence by slowing China’s access to key technologies. They point to China’s rapid advances, exemplified by breakthroughs such as deep-learning language models from Baidu and the launch of AI chatbots like DeepSeek in early 2025.

Yet, loopholes and workarounds risk undercutting the regime’s intent: Chinese firms may find indirect ways to procure Western hardware, or intensify their focus on indigenous solutions. A recent McKinsey report notes that, while China remains reliant on U.S.-designed AI chips for now, its investments in domestic semiconductor fabrication are projected to reach $150 billion by 2027.

Nvidia and AMD, for their part, have highlighted the urgency of remaining present in China, which is the second-largest AI market globally. In their July statements, Nvidia warned, “America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race.”

What Happens Next?

As shipments of the H20 and MI308 resume, all eyes are on enforcement of the new 15% fee and whether the Biden or future administrations will let the practice stand. Legal challenges could emerge from both Congress and industry, especially given the lack of precedent for a government taking direct revenue from specific international sales by private companies.

Meanwhile, the deal could set a template for future trade and technology disputes—not just with China, but with other nations vying for strategic materials and market dominance. “If it lasts, it creates a new playbook for balancing security, industrial competitiveness, and trade revenue,” observes industry analyst Dana Blakenhorn.

Conclusion

The U.S. government’s 15% cut on Nvidia and AMD’s chip sales to China marks an inflection point in the ongoing contest for technological leadership. As debates intensify over constitutionality, national security, and market access, the global semiconductor industry may be entering a new era of unprecedented government intervention, deepening the intertwining of geopolitics, trade policy, and technological innovation.