Nvidia Deal Offers Path Forward in Global Trade War Amid US-China Tensions

President Donald Trump's deal with Nvidia and AMD to pay 15% of revenue from Chinese AI chip sales to the US offers a model for circumventing trade tensions. The deal provides a path to enter the Chinese market despite severe export controls and tariffs. Companies are struggling to understand the implications of Trump's order, with concerns about the potential expansion of the model to other industries.

In a groundbreaking move, President Donald Trump has brokered a deal with NVIDIA Corp. (NASDAQ: NVDA) and Advanced Micro Devices Inc. (NASDAQ: AMD), mandating a 15% revenue share from their Chinese AI chip sales to the U.S. government. This unprecedented agreement, announced on August 11, 2025, marks a significant shift in global technology trade and export policies.

The deal allows NVIDIA and AMD to resume sales of their less powerful AI processors, specifically NVIDIA's H20 AI accelerator and AMD's MI308 chips, to China, which were previously subject to export bans. This move comes after the Trump administration initially halted these sales in April 2025, citing national security concerns. The 15% revenue share is a condition for obtaining export licenses, a departure from traditional export control policies.

The implications of this deal are substantial. For NVIDIA, the potential financial impact is significant. The company had previously estimated a potential loss of an additional $5.5 billion due to tight export controls on its H20 chips. With CEO Jensen Huang estimating $15 billion from H20 chip sales to China, the 15% cut implies a $2.25 billion payment to the U.S. government. Similarly, AMD reported an $800 million charge in Q2 2025 related to restrictions on its MI308 chip sales to China.

Initial market reactions have been mixed. Despite the re-issuance of export licenses, shares of both NVIDIA and AMD experienced slight declines in premarket trading after the revenue-sharing deal was reported. This reaction underscores investor concern over the precedent set by the revenue-sharing model and its potential long-term impact on profitability.

The deal has sparked debate among experts and legal scholars, who question its constitutionality and worry it sets a dangerous precedent. The U.S. government frames the 15% payment as a condition for obtaining export licenses rather than a direct tax, but critics argue it could undermine the credibility of U.S. export controls.

In the broader context of the U.S.-China trade war, this deal represents a seismic shift in technology trade. It signals a potential new phase in the conflict, where economic concessions are directly tied to market access for sensitive technologies. The deal adds another layer of complexity to global technology supply chains, as companies operating internationally may face increased uncertainty regarding market access and potential revenue-sharing demands in other sectors or regions.

As the semiconductor industry continues to evolve, this deal offers a model for circumventing trade tensions. Companies are struggling to understand the implications of Trump's order, with concerns about the potential expansion of the model to other industries. The long-term effects of this agreement remain to be seen, but it is clear that it represents a significant departure from traditional export control policies.

References:
[1] https://markets.financialcontent.com/stocks/article/marketminute-2025-8-12-us-strikes-unprecedented-chip-deal-nvidia-and-amd-to-share-china-revenue-raising-margin-concerns