Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD), two American titans in the artificial intelligence (AI) semiconductor sector, have reportedly agreed to an unprecedented deal with the U.S. government to share 15% of their China-derived AI chip revenues. Multiple major news outlets—including The Financial Times, The Wall Street Journal, and Bloomberg—confirmed the arrangement, which is designed to secure critical export licenses amid mounting geopolitical tensions and evolving regulatory scrutiny.

Background: Navigating the U.S.-China Tech Battlefield

The U.S. government, under both the Biden and Trump administrations, has been tightening restrictions on the export of advanced technologies—especially AI and semiconductor technologies—to China, citing national security concerns. In 2023 and 2024, the introduction of sweeping export controls over high-end GPUs and data-center chips alarmed American suppliers and brought disruptions to what had been a booming China technology market. China accounted for an estimated 20-25% of Nvidia and AMD data center revenues before these restrictions.

Nvidia, which had crafted the H20, an AI chip specifically designed to comply with U.S. restrictions, found itself ensnared when the Biden administration blacklisted even these lower-power products in April 2025. AMD faced a similar struggle with its MI308 chips, which are also designed for AI and high-performance computing. Notably, these tailored chips were engineered in response to an ever-shifting regulatory maze, illustrating the challenges facing multinational chipmakers in the global supply chain.

The 15% Revenue-Sharing Deal: A New Precedent

Following extensive negotiations, reportedly accelerated after then-President Donald Trump met with Nvidia CEO Jensen Huang and a group of industry leaders at the White House this June, the U.S. government agreed to allow a limited resumption of AI chip exports to China. However, as a condition, Nvidia and AMD will remit 15% of their China AI chip sales revenue to the U.S. Treasury. This mechanism is currently unique in U.S. trade policy and has provoked substantial debate among legal experts and policymakers.

The export licenses, granted last week, specifically approve Nvidia’s H20 and AMD’s MI308 for sale to Chinese customers—excluding certain blacklisted companies thought to have links to the Chinese military or surveillance state.

Nvidia said in a statement that it “complies with all U.S. export regulations”. AMD declined to comment, but industry analysts note that both chipmakers had little alternative but to accept the terms, given the continued strategic significance of the China market.

Market Reaction: Stock Fluctuations and Investor Sentiment

After an initial rally in June 2025, when it appeared U.S. regulators would green-light China sales, shares of Nvidia and AMD have eased in early premarket trading on news of the 15% levy. As of the most recent session:

• Nvidia shares fell by 1%.
• AMD shares dropped by 2%.
• Taiwan Semiconductor Manufacturing Company (TSMC, NYSE: TSM), which manufactures chips for both companies, slipped fractionally.

Despite this, Nvidia recently hit an all-time high, with AMD stock hovering near its own 52-week threshold and TSMC consolidating near record levels. The key concern for investors is that the 15% revenue cut—equivalent to an estimated hundreds of millions in annual profits—will compress margins in what had been one of the highest-growth segments of the chip industry.

Strategic Importance of the China Market

China remains the largest single-country market for data center and AI chips outside the United States. While Chinese firms such as Huawei and Alibaba have accelerated their domestic chip designs, neither has yet matched the raw performance or developer ecosystem of Nvidia’s CUDA platform or AMD’s ROCm environment. As a result, access to U.S.-made AI chips remains highly prized by Chinese companies and vital for American chipmakers’ global revenues.

According to IDC, China spent over $13 billion on AI chips in 2024, with the market projected to grow to $16 billion by 2026. U.S. firms captured the majority of that spend until recent restrictions forced a sharp market contraction.

Legal and Geopolitical Controversy

The decision to impose what some are calling a “quasi-tax” on American exports has stirred controversy. Legal scholars point out possible constitutional challenges—including the U.S. Constitution’s prohibition on export duties: “No Tax or Duty shall be laid on Articles exported from any State.” Yet others argue the measure is a regulatory fee rather than a tax, likely to be litigated in coming months.

Politically, the move highlights the ongoing weaponization of advanced technology in the broader U.S.-China economic rivalry. For the Biden and Trump administrations alike, the policy reflects both the intense pressure to protect intellectual property and national security, and the practical imperative to support an export sector worth billions in annual revenues and hundreds of thousands of U.S. jobs.

Industry Impact and The Road Ahead

While the reauthorization to sell chips in China represents a relief for both Nvidia and AMD, the profitability of future deals remains under pressure. Both companies continue to accelerate investments in new architectures, advanced manufacturing (often via TSMC in Taiwan), and strategic partnerships to mitigate risk. Industry watchers anticipate further rounds of policy whiplash as the AI chip race only intensifies and both Washington and Beijing seek new leverage points.

Meanwhile, investors are closely following the broader sector—tracking how giants like Alphabet (Google), Apple, and Taiwan Semiconductor position themselves for the next wave of AI infrastructure spending, with deep capital flows already shifting based on each new policy revelation.

For now, the 15% revenue-sharing agreement stands as a milestone in the global tech trade war—a solution born of necessity and uncertainty, with both risks and rewards for the future of American innovation.