Why Trump's 'give us a cut and take license' chip move has experts worried

In a surprising step that is sure to cause dismay among American companies, a US official said on Sunday that Nvidia and AMD have agreed to give the US government 15% of the profits from sales of cutting-edge computer chips to China.

Sales of H20 chips to China were suspended by US President Donald Trump’s administration in April. However, Nvidia claimed last month that Washington had agreed to let the company to resume sales and that it intended to begin delivery shortly.

The Financial Times said that the chipmakers consented to the agreement in order to receive export permits for their semiconductors, notably AMD’s MI308 processors. According to the article, the Trump administration has not yet decided how to spend the funds.

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On Friday, another US official said that the Commerce Department has started to provide licenses for the sale of H20 AI processors to China.

In Monday’s pre-market trading, Nvidia and AMD’s shares dropped 1.8% and 3.3%, respectively.

It is unprecedented for a president to agree to pay the US government from sales in China, and it is Trump’s most recent attempt to influence business decisions.

Last week, he called incoming Intel CEO Lip-Bu Tan “highly conflicted” because of his connections to Chinese companies and asked that he immediately quit. He also harasses industry CEOs to invest in America to support local employment and manufacturing.

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When asked if Nvidia had agreed to pay 15% of revenues to the United States, an Nvidia spokesperson said in a statement: “We follow rules the US government sets for our participation in worldwide markets.”

The spokesperson added: “While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”

AMD did not respond to a request for comment on the news, which was first reported by the Financial Times earlier on Sunday. The US Department of Commerce did not immediately respond to a request for comment.

China’s foreign ministry, approached for comment on Monday, said that China had repeatedly expressed its position on the issue of US chip exports to China. The ministry in the past has accused the US of using technology and trade issues to “maliciously contain and suppress China”.

US Commerce Secretary Howard Lutnick said last month the planned resumption of sales of the AI chips was part of US negotiations with China to get rare earths and described the H20 as Nvidia’s “fourth-best chip” in an interview with CNBC.

Lutnick said it was in US interests to have Chinese companies using American technology, even if the most advanced was prohibited from export, so they continued to use an American “tech stack”.

The US official said the Trump administration did not feel the sale of H20 and equivalent chips was compromising US national security. The official did not know when the agreement would be implemented nor exactly how, but said the administration would be following the law.

Alasdair Phillips-Robins, who served as an adviser at the Commerce Department during former President Joe Biden’s administration, criticized the move.

“If this reporting is accurate, it suggests the administration is trading away national security protections for revenue for the Treasury," Phillips-Robins said.

Nvidia generated $17 billion in revenue from China in the fiscal year ending January 26, representing 13% of total sales. AMD reported $6.2 billion in China revenue for 2024, accounting for 24% of total revenue.

Meanwhile, the industry watches anxiously as Intel’s Lip-Bu Tan, is due to meet Trump today amid mounting scrutiny over the tech sector’s tightrope between compliance and autonomy.