Nvidia and AMD Agree to Share 15% of China Chip Revenues with U.S. Under Export License Deal

Nvidia and AMD have agreed to remit 15% of their China chip revenue to the US government under an export license deal. The arrangement, part of a broader deal with the Trump administration, will see Nvidia contribute a portion of its H20 chip earnings and AMD contribute revenues from its MI308 chip. The deal reflects growing pressure on US semiconductor firms to align with national trade and security policies.

In a significant development, Nvidia and AMD have agreed to share 15% of their China chip sales with the U.S. government as part of an export license deal. This arrangement, brokered by the Trump administration, involves Nvidia contributing a portion of its H20 chip earnings and AMD remitting revenues from its MI308 chip. The deal reflects growing pressure on U.S. semiconductor firms to align with national trade and security policies.

The agreement comes after the U.S. Commerce Department began issuing licenses to Nvidia to export its H20 chips to China [1]. The decision to allow Nvidia to resume H20 chip exports to China follows a reversal of an April ban. The ban had posed a significant challenge for Nvidia, potentially cutting $8 billion from its revenue in the July quarter [1]. The company had warned that restrictions could impact its sales outlook, with China accounting for 12.5% of its revenue in the first quarter [1].

Nvidia's CEO, Jensen Huang, met with former U.S. President Donald Trump on Wednesday, which may have influenced the decision to start issuing export licenses [2]. The meeting occurred two days before the Commerce Department began issuing the licenses, according to the Financial Times [2]. Both Nvidia and AMD are now poised to benefit from the reopening of the Chinese market. However, the agreement to share 15% of sales with the U.S. government underscores the strategic importance of the Chinese market for American chipmakers. Despite restrictions, China remains a vital revenue source, accounting for a substantial portion of their sales [1].

This development is a win for Nvidia and AMD, which have been seeking to maintain their market position in China. The H20 chip is one of the few advanced AI chips that Nvidia can now export to China, and this agreement ensures a pathway for future sales [1]. For investors, this news suggests a potential recovery in revenue for these companies, particularly if they can successfully navigate the competitive landscape in China [1].

References:
[1] https://www.phoneworld.com.pk/breaking-news-us-allows-nvidia-to-resume-h20-chips-export-to-china/
[2] https://www.investing.com/news/stock-market-news/us-licenses-nvidia-to-export-chips-to-china-after-ceo-meets-trump-ft-reports-4181584