The Risks and Rewards of U.S. Export Control Monetization in the AI Chip Sector

The Trump administration's 15% revenue-sharing deal with Nvidia and AMD for China chip sales has redefined the landscape of U.S. export control policy. By monetizing access to the Chinese market, the U.S. government has created a hybrid model that blends commercial interests with national security. While this arrangement offers immediate financial gains and strategic leverage, it also raises critical questions about long-term sustainability, legal durability, and the accelerating shift in global semiconductor power dynamics.

The Financial Mechanics of the Deal

Under the agreement, Nvidia and AMD retain 85% of revenue from sales of mid-tier AI chips like the H20 and MI308 to China, while the U.S. government collects 15%. For context, Nvidia's H20 chip alone generated $4.6 billion in revenue in a single fiscal quarter before export restrictions were reimposed. If sales resume at previous levels, the U.S. Treasury could collect over $1 billion quarterly from this arrangement. AMD's MI308 chip is expected to contribute similarly, though its market share remains smaller.

This revenue-sharing model is unprecedented in its transactional nature. Unlike traditional export controls, which aim to restrict access, this deal incentivizes compliance by offering a financial return. For investors, the immediate benefit is clear: both companies regain access to a critical market while maintaining a significant portion of their earnings. However, the 15% cut introduces a layer of uncertainty. If the U.S. government demands higher shares in the future—potentially up to 30–50% for advanced chips like the Blackwell—as Trump has hinted, margins could erode further.

Strategic Implications and Geopolitical Risks

The deal's strategic value lies in its ability to extract economic concessions while maintaining U.S. influence over China's access to advanced AI technology. By controlling the flow of chips, the U.S. can indirectly shape China's technological trajectory. However, this approach carries risks.

First, the legal basis of the 15% revenue share is under scrutiny. Critics argue it functions as an unconstitutional export tax, potentially undermining the integrity of the U.S. export control system. Rep. John Moolenaar (R-MI) and Rep. Raja Krishnamoorthi (D-IL) have both condemned the arrangement as a dangerous precedent, warning it could weaken national security by prioritizing financial gain over strategic interests.

Second, China's response to U.S. export controls has accelerated its semiconductor self-reliance efforts. Huawei, once reliant on U.S. chips, now produces advanced semiconductors like the Kirin 9000C. Meanwhile, state-backed startups such as Biren Technology and ChangXin Memory are challenging U.S. dominance in memory and GPU markets. These developments suggest that China's push for self-sufficiency may reduce the long-term demand for U.S. chips, even as the Trump-era deal provides temporary access.

The Dual-Edged Sword of Market Access

For Nvidia and AMD, the deal is a double-edged sword. On one hand, it secures a foothold in a market projected to grow at 7.4% annually in the data center segment. On the other, it exposes them to geopolitical volatility. If U.S.-China relations deteriorate further, the Trump administration could tighten restrictions or increase revenue shares, squeezing profitability. Conversely, if tensions ease, the U.S. might reduce its stake, but the political unpredictability remains a persistent risk.

The semiconductor industry as a whole is expected to expand from $697 billion in 2025 to $1 trillion by 2030, driven by AI and data center demand. However, this growth hinges on U.S. companies retaining access to China. If domestic alternatives mature, as they are in Huawei's 5G infrastructure and Alibaba's RISC-V-based CPUs, the market share available to U.S. firms could shrink.

Investment Advice: Balancing Exposure and Diversification

For investors, the key is to balance exposure to the AI chip sector with diversification across geographies and technologies. Nvidia and AMD remain well-positioned to benefit from global AI demand, but their China-dependent revenue streams are inherently volatile.

1. Short-Term Play: The 15% revenue-sharing deal provides a near-term boost to both companies' cash flows. Investors should monitor quarterly earnings reports for signs of sustained demand in China.
2. Long-Term Caution: Given China's self-reliance efforts, investors should diversify holdings into companies with strong domestic semiconductor ecosystems, such as TSMC or ASML, which supply equipment to Chinese foundries.
3. Geopolitical Hedging: Consider hedging against U.S.-China tensions by investing in AI startups or companies developing alternative architectures (e.g., neuromorphic chips) that could reduce reliance on traditional GPU markets.

Conclusion: A Precarious Equilibrium

The Trump administration's revenue-sharing deal with Nvidia and AMD is a bold experiment in monetizing export controls. While it offers immediate financial rewards and strategic leverage, it also risks creating a precedent that could destabilize the U.S. export control regime. For investors, the challenge lies in navigating the delicate balance between capitalizing on AI-driven growth and mitigating the risks of geopolitical shifts and China's rising self-sufficiency. In this high-stakes environment, adaptability and diversification will be paramount.