Nvidia, AMD to Pay 15% on China AI Chip Sales in US Deal
By Hadriana Lowenkron Michael Sasso and Ian King Bloomberg Nvidia Corp and Advanced Micro Devices Inc agreed to pay of their revenues from Chinese AI chip sales to the US regime in a deal to secure export licenses an strange arrangement that may unnerve both US companies and Beijing Nvidia plans to share of the revenue from sales of its H AI accelerator in China according to a person familiar with the matter AMD will deliver the same share from MI revenues the person added asking for anonymity to discuss internal deliberations Related Articles Nvidia continues expansion in South Bay after new deal Nvidia CEO Huang emerges as reluctant emissary for US-China Nvidia to resume H AI chip sales to China in US reversal Chipmaker Nvidia becomes greater part valuable company in the world at trillion Nvidia breakout puts trillion field value within reach The arrangement reflects US President Donald Trump s consistent effort to engineer a financial payout for America in return for concessions on deal His administration has shown a willingness to relax contract conditions like tariffs in return for giant funding in the US as with Apple Inc s pledge to spend billion on domestic manufacturing But such a narrow select export tax has little precedent in modern corporate history Beijing which has grown increasingly hostile to the idea of Chinese firms deploying the H is unlikely to warm to the idea of a chip tax Yuyuantantian a social media account affiliated with state-run China Central Television that regularly signals Beijing s thinking about contract on Sunday slammed the chip s supposed prevention vulnerabilities and inefficiency Nvidia shares fell in premarket trading on Monday AMD shares declined about before New York exchanges opened This seeming quid pro quo is unprecedented from an export control perspective The arrangement risks invalidating the national guard rationale for U S export controls noted Jacob Feldgoise a researcher at the DC-based Center for Safeguard and Emerging Hardware It will likely undermine the US position when negotiating with allies to implement complementary controls he added Allies may not believe U S policymakers if they are willing to deal away those same national safety concerns for economic concessions either from U S companies or foreign governments An Nvidia spokesperson disclosed the company follows US export rules adding that while it hasn t shipped H chips to China for months it hopes the rules will allow US companies to compete in China AMD didn t at once respond to a request for comment Trump has targeted chipmakers in the past week with a series of declarations that were light on specifics and rattled companies from Silicon Valley to Asia On Wednesday Trump threatened tariffs on imported chips unless companies also made investments on US soil On examination though those new tariffs would apply to almost no one since most of major chipmakers appear to be covered by existing investments or separate transaction deals On Thursday Trump called for the ouster of Intel Corp s Chief Executive Officer Lip-Bu Tan calling the Malaysian-born entrepreneur highly conflicted without giving details on what the likely conflicts were Tan who sent a letter to employees assuring them that he was engaging with the administration is due to visit the White House on Monday the Wall Street Journal mentioned He s been targeted by Republican Senator Tom Cotton over historical business ties to China The Financial Times earlier informed the advancement on AMD and Nvidia The outlet commented in separate analysis that the Commerce Department had begun issuing H licenses last week days after Nvidia Chief Executive Officer Jensen Huang met with Trump Huang has lobbied long and hard for the lifting of restrictions arguing that walling China off will only slow the spread of American equipment and encourage local rivals such as Huawei Technologies Co It s a strategic bargaining chip that tightens Washington s grip on a critical tech sphere during transaction negotiations with China declared Hebe Chen an analyst with Vantage Markets in Melbourne Over time this hurdle for chips entering China will likely deter Nvidia and AMD from deeper expansion in the world s largest chip-importing field while giving local Chinese producers a clear edge to capture realm share and accelerate domestic semiconductor innovation If Washington goes ahead with the tax it should funnel certain capital to the US but not an enormous amount in relative terms Both Nvidia and AMD have revealed it ll take time to ramp back up production of their China-specific products even if order levels return to previous levels which is uncertain Nvidia raked in billion of revenue from the H in the fiscal quarter ended April days after new restrictions on shipping the AI accelerator to China were imposed It also noted it had been unable to ship billion of H China revenue in that period because of the new rules That implies it would have got more than billion in H sales to China during the period If it can return to that level the US regime will stand to get about a billion dollars a quarter from its deal AMD could generate billion to billion of revenue if restrictions were lifted Morgan Stanley estimates Chinese alternatives such as Huawei s Ascend chips now account for to of domestic demand it reckoned The US cabinet clearly requirements the money given its deficits and eagerness to collect tariffs disclosed Vey-Sern Ling managing director at Union Bancaire Privee in Singapore But the complication is China s accusations about H chips containing backdoors which could be a negotiation tactic to highlight that the country is not hard up for US chips With assistance from Shadab Nazmi Yasufumi Saito Debby Wu Winnie Hsu Jessica Sui Wendy Benjaminson and Kevin Whitelaw Updates with premarket share moves additional context from fifth paragraph More stories like this are available on bloomberg com Bloomberg L P
