US Strikes Unprecedented Deal with Nvidia and AMD: 15% Chip Sales Levy for China Access
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The US goverment is set to receive 15% of the revenue generated by Nvidia and AMD from sales of advanced chips to China, a move described by industry experts as “unprecedented” and raising concerns about the future of US-China trade relations. the agreement, reached after intense lobbying and shifting policy, marks a significant departure from previous export restrictions and introduces a novel financial arrangement with private companies.
The deal reverses course from months of restrictions imposed by the Trump governance, which banned the sale of these chips to China citing national security concerns. Those bans were lifted in mid-July, but the current agreement goes further, with the US government directly benefiting from American firms’ business with China. Critics argue this arrangement is both perplexing and potentially damaging to long-term market stability.
The Chips at the Heart of the Matter
The chips in question are advanced semiconductors crucial for artificial intelligence (AI) applications, a sector poised to reshape the global economy. Investors are heavily betting on AI’s transformative potential, and these chips are the building blocks of that future.
Nvidia, recently becoming the first company to reach a $4 trillion market valuation, developed the H20 chip, while AMD created the MI308 chip.
House has yet to detail how the 15% levy will be implemented – including where the funds will be directed and how they will be utilized.
The agreement raises essential questions about its implications for other US companies operating in or seeking access to the Chinese market, including giants like Apple and Tesla, and also smaller businesses. Is this a new tax on doing business with China?
Impact on Investors and Trade Negotiations
The 15% cut is likely to impact Nvidia and AMD’s profitability, even with substantial sales to China. Chip manufacturers operate on long-term planning cycles, and this new levy could dampen investor sentiment, which is heavily reliant on earnings and revenue projections.
However,the deal may be intertwined with ongoing tariff negotiations led by former President Trump,who recently threatened 100% tariffs on foreign-made chips unless companies invest in US manufacturing.A US Commerce Secretary even indicated that chip exports are being leveraged in negotiations with China in exchange for access to rare-earth elements. .
National Security Concerns Remain
The White House maintains that the sale of the H20 and equivalent chips will not compromise national security, despite previous concerns that led to the initial bans. National security experts and lawmakers have long warned about the potential for China to leverage AI chips for military applications and to gain a competitive advantage in AI progress.
Conversely, some argue that restricting chip sales to china only encourages domestic innovation and competition. they believe it is preferable for China to rely on US technology, a outlook that appears to have gained traction. This shift may be a direct result of lobbying efforts by Nvidia’s CEO, Jensen Huang, who met with Trump at the White House last week, reportedly where the agreement was finalized. Huang’s efforts also contributed to the reversal of the April ban on H20 sales to China.
Who Benefits from the Deal?
The agreement is a clear win for China, which is eager to acquire these chips. Leading Chinese tech companies,including ByteDance,Tencent,and DeepSeek,reportedly purchased H20s before the US imposed restrictions in April. The US government also stands to benefit, with analysts at Bernstein Research estimating potential revenue of up to $2 billion from chip sales to China.
A further potential victory for Washington could come in the form of a deal regarding rare-earth elements, currently monopolized by China. However, critics express alarm over the precedent this sets.
“This is a very different US environment from the one that we’ve had in the past,” noted a trade expert. “I suppose, generously, you could call it the flexibility of the Trump White House in responding to requests.”
