Chip Shock: Nvidia and AMD Reportedly Striking Unprecedented Deal to Hand 15% of China Sales to U.S. Government

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Nvidia (NVDA) and Advanced Micro Devices (AMD) shares are under pressure this morning after the Financial Times reported that both companies agreed to give the U.S. government 15% of their revenues from certain chip sales to China in exchange for export licenses. The FT, citing people familiar with the matter including a U.S. official, said the unprecedented arrangement covers Nvidia’s H20 chip and AMD’s MI308—AI accelerators specifically designed to comply with U.S. performance limits on exports to China. While the FT was the first to report the agreement, neither company has confirmed the full details, and the U.S. Commerce Department has not formally announced the terms, making it important to note that this remains primarily an FT-sourced story.

According to the FT, the licenses were granted last week, just two days after Nvidia CEO Jensen Huang met President Donald Trump. The move effectively reverses an April ban on H20 exports imposed by the Trump administration, which had cited national security concerns. In premarket trading Monday, Nvidia shares were down roughly 1.4% to $180.23, while AMD slipped 2.6%. The selling pressure comes despite Wells Fargo recently lifting its price target on Nvidia to $220 from $185, citing stronger-than-expected intra-quarter data center demand and the resumption of China H20 sales. Wells now estimates Nvidia’s fiscal Q2 revenue at $48.2 billion, well above the company’s $45 billion guidance midpoint.

The stakes are high for U.S. equity markets given Nvidia’s and Microsoft’s combined influence—together they now account for over 15% of the S&P 500’s weighting, the highest on record for any two stocks. That concentration means developments affecting Nvidia can ripple broadly through passive index funds, sector ETFs, and market sentiment.

The FT report characterizes the arrangement as a quid pro quo unprecedented in U.S. export control history—no American company has previously agreed to remit a share of revenues in exchange for license approval. A U.S. official told the paper the government has not yet decided how the funds will be used. Bernstein analysts estimate Nvidia could have sold around 1.5 million H20 chips in China in 2025 without restrictions, generating about $23 billion in revenue. Based on that figure, a 15% cut would imply billions flowing to Washington.

The H20 chip itself was created as a workaround after the Biden administration’s tighter AI chip export controls in 2023, which blocked sales of more advanced models. While the U.S. maintains that the H20 is below the top performance tier, critics argue it still represents a potent accelerator for AI capabilities and could aid China’s military. In a letter to Commerce Secretary Howard Lutnick, former Trump deputy national security adviser Matt Pottinger and other security experts urged the administration to block H20 sales entirely, calling the chip a “potent accelerator of China’s frontier AI capabilities.” Nvidia has rejected such claims as “misguided” and says the H20 is not suited for military applications.

Chinese reaction has been skeptical. Over the weekend, a social media account affiliated with state broadcaster CCTV suggested the chips might contain “backdoors” and criticized them as neither advanced nor environmentally friendly. China’s cybersecurity regulator has previously questioned Nvidia about “tracking and positioning” and “remote shutdown” capabilities—allegations the company denies, stressing that embedding such features would be “a gift to hackers and hostile actors.” There is also no guarantee that Chinese buyers will embrace the chips despite the new license framework.

The FT report lands at a sensitive moment in U.S.–China relations. A trade truce reducing tariffs is set to expire on August 12, with officials signaling a likely extension as part of ongoing negotiations. Technology exports, particularly AI and high-bandwidth memory (HBM) chips, have emerged as key bargaining chips in the broader trade talks ahead of a potential Trump–Xi summit. The FT separately reported that China is pushing for relaxed export controls on HBM chips as part of any deal.

While export controls themselves are a longstanding policy tool, levying a fixed revenue share on specific sales to a specific market is a novel mechanism. Supporters in the administration may view it as a way to balance national security concerns with maintaining U.S. commercial leadership in AI hardware. Critics counter that it risks undermining the strategic intent of the controls by enabling technology transfers for a price.

For now, the market is treating the FT’s report cautiously. Without official confirmation from all parties, investors are weighing the revenue opportunity from resumed China sales against the political and reputational risks. Given Nvidia’s market cap and index weight, as well as the chip sector’s sensitivity to U.S.–China trade developments, the story is likely to remain a focal point for both equity and geopolitical analysts in the weeks ahead.

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