As it stands, both Nvidia and AMD have cut deals with the U.S. government. They are free to sell high-end artificial intelligence (AI) chips to China now, but have to return 15% of their revenue from these sales back to the government. The businesses are trying to avoid the tight terrain of export controls and tariffs on technologies sold to China. This agreement helps facilitate their ability to adapt to those climate threats.
This contract allows Nvidia and AMD to obtain the necessary licenses from the U.S. government. This administration has only recently begun issuing licenses for high-end AI chips to be sold. This most recent development represents a serious sea change. Nvidia had already ceased shipping its flagship H20 AI chips to China for months in light of prior restrictions. In July, the company restarted sales of the H20 AI chips. These chips were ostensibly tailored for the Chinese market due to the Biden administration’s restrictions.
In April, while still under the Trump administration, the U.S. government placed restrictions on the export of specific high-performance AI inference chips to China. This unprecedented step was taken out of national security considerations. Although these bans were put on hold for a period of time, the current restrictions have since shifted more toward tariff-related issues. The new settlement now allows Nvidia and AMD to return to a lucrative market that’s fast becoming essential to their business success.
Nvidia is taking a rosy view of the new export control regulations. They’re counting on these regulations to make them more globally competitive – both in China and worldwide. A spokesperson for Nvidia stated, “We follow rules the U.S. government sets for our participation in worldwide markets,” which underscores the company’s commitment to compliance.
Now, each company has to return part of their profits from these deals. This payment, known as a royalty, is paid to the U.S. government as part of the agreement. Such a deal is understood to be sufficient to save economic face while fiddling with the national security alarm bell.
The recent pause on the ban on AI chip sales has led Nvidia to pledge up to $500 billion in investments in data centers within the U.S., demonstrating its commitment to bolstering its domestic operations while expanding into international markets.
AMD’s involvement in this agreement highlights the competitive nature of the semiconductor market, as both companies aim to capitalize on China’s growing demand for advanced technology. This issuance of licenses continues to open the door for U.S. firms to go in and U.S. They can now begin to attempt to re-establish their foothold in arguably the world’s largest technology market.
