Nvidia, AMD strike deal to pay 15% of China chip sales to US in return for export licences

The deal is unconstitutional and undermines years of national security policy, critics warn

Nvidia and AMD have agreed to hand over 15% of their revenue from advanced chip sales to China in exchange for US government export licences.

The unprecedented arrangement signals a partial easing of the US-China tech trade war, even as it raises constitutional questions and stirs concerns over the credibility of American export controls.

Under the deal, Nvidia will pay the levy on Chinese sales of its H20 chips, while AMD will do the same for its MI308 chips.

Both products had been banned from export to China since April, despite the H20 being specifically engineered to comply with earlier restrictions from the Biden administration.

Donald Trump rolled back those bans last month, and the Commerce Department began issuing licences for the H20 last week.

Analysts link the move to China's recent relaxation of rare earth export restrictions and to months of behind-the-scenes lobbying.

Nvidia CEO Jensen Huang visited both Beijing and Washington in recent months, meeting Trump as recently as last Wednesday.

Trump, who has threatened 100% tariffs on foreign-made semiconductors, has publicly praised Huang and Nvidia, which in July became the first company to surpass a $4 trillion market valuation.

"We follow rules the US government sets for our participation in worldwide markets. While we haven't shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide," Nvidia said in a statement.

Last month, US commerce secretary Howard Lutnick argued it was in America's interest for China to use US technology, describing the H20 as Nvidia's "fourth-best chip."

Still, critics warn the deal undermines years of national security policy and apparently goes against US law.

US constitution forbids export taxes

"In addition to the policy problems with just charging Nvidia and AMD a 15% share of revenues to sell advanced chips in China, the US constitution flatly forbids export taxes," said Peter Harrell, former White House senior director for international economics under the Biden administration.

“Even with scaled-down versions of flagship Nvidia [chips], China could spend and buy enough of them to build world-leading, frontier-scale AI supercomputers," Saif Khan, former director of Technology and National Security, told Reuters.

Ilaria Carrozza, a senior researcher at the Peace Research Institute Oslo, told The Guardian the arrangement could damage trust with allies in Europe and East Asia.

For Nvidia and AMD, however, the calculation is clear: the 15% levy is worth it. The chips in question serve China's growing AI accelerator market, which Nvidia estimates could reach $50 billion – a fraction of the projected global market by 2030, but still lucrative.

Even if entirely dominated by US firms, the US government's take would be about $7.5 billion, though realistic sales suggest half that figure.

For Nvidia, the arrangement offers a path to clear surplus stock. The company took a $4.5 billion writedown in the first quarter due to excess H20 inventory after April's ban.

With gross margins near 75%, Nvidia – and AMD, whose latest quarter saw 40% margins – could even pass some costs to Chinese buyers.

China’s chip industry is advancing

Yet the deal comes with caveats. Nvidia's chips are already available in China through grey-market channels, with smugglers reportedly hiding them in prosthetic baby bumps and crates of live lobsters.

And China's domestic chip industry is closing the gap, with Huawei emerging as a leader and new AI models like DeepSeek requiring less computing power.

DeepSeek alone wiped $800 billion from the market value of Nvidia and Broadcom in one day as investors fretted over high-end chip demand.

As China advances in self-sufficiency, one of the world's biggest tech markets could soon shut its doors to US chipmakers altogether – removing from Washington even the option to trade national security for cash.