Nvidia and AMD's 'Pay to Play' Deal Sparks Controversy in China

The US government's restrictions on Nvidia and AMD's chip sales to China have sparked controversy. Nvidia CEO Jensen Huang argued for US tech adoption in AI globally to prevent China's dominance. The US government lifted restrictions after Nvidia and AMD agreed to pay 15% of China sales to the US government. Critics call the deal "bizarre," "really weird," and "crony capitalism." China has responded with harsh restrictions on Nvidia.

The US government's recent restrictions on Nvidia and AMD's chip sales to China have sparked significant controversy and debate. Nvidia CEO Jensen Huang has been vocal about the need for the US to adopt a more aggressive approach to AI globally to prevent China's dominance in the field. The US government lifted these restrictions after Nvidia and AMD agreed to pay 15% of their China sales to the US government [1].

The deal has been criticized as "bizarre," "really weird," and "crony capitalism" by some observers. Critics argue that the arrangement is a form of protectionism that favors US companies at the expense of global competition. However, proponents of the deal contend that it is a necessary step to ensure that the US maintains its technological leadership in AI.

China, in response to the deal, has imposed harsh restrictions on Nvidia. The Chinese government has sent notices to various firms, forbidding the use of Nvidia's H20 chips, particularly for government or national security-related work by state enterprises or private companies [2]. This has led to a significant slowdown in the production and use of Nvidia's chips in China.

Nvidia's stock has been affected by these developments. The company's shares have fallen by more than 20% this year, sliding along with the broader market. However, the stock has gained 30% this year, although it has been on a three-session losing streak recently [3]. The uncertainty around the US's China restrictions and fears concerning an AI bubble burst have weighed on the stock.

The deal has also raised legal and political questions. The US government's requirement for Nvidia and AMD to share 15% of their China sales with the US government is unusual and raises questions about the legality and precedent it sets. The legal debate turns on whether the 15% is viewed as a tax on exports, which would be a serious barrier under the Export Clause, or a regulatory fee that supports oversight, which would fit under the Export Control Reform Act [3].

The deal has also set a policy precedent. The licensing corridor maps cleanly to three chips: the H20, B30A, and RTX 6000D. These chips are subject to strict performance caps, audits, and the revenue share model. The arrangement crafted by the Trump administration is unusual and has the potential to further fragment the global AI market.

References:
[1] https://www.aol.com/nvidia-ceo-jensen-huang-warns-171126224.html?utm_content=topic%2Fworldeconomy&utm_source=flipboard
[2] https://stocktwits.com/news-articles/markets/equity/nvidia-on-track-to-extend-drop-on-h20-china-ai-chip-order-halt/chsmnkSRdiv
[3] https://www.aiwire.net/2025/08/20/trump-ties-ai-chip-exports-to-revenue-sharing/