New Export Tax on AI Chips Affects Nvidia and AMD

SadaNews - In a move described as unprecedented in the history of modern global trade, American companies "Nvidia" (Nvidia Corp.) and "Advanced Micro Devices" (AMD) reached an agreement to pay 15% of their revenue from sales of AI chips in China to the U.S. government in exchange for special export licenses.

Nvidia will pay 15% of the revenue from sales of the AI chip H20 in the Chinese market, while AMD will provide the same percentage from the revenue of the MI308 chip, according to sources cited by Bloomberg News.

This development follows recent statements by Trump warning that a 100% tariff will be imposed on semiconductor imports unless companies comply with local manufacturing. The proposed tariffs have exacerbated concerns in the technology sector, prompting companies to seek alternative compliance strategies.

This arrangement also clearly reflects U.S. President Donald Trump's ongoing push for direct financial benefits to the U.S. in exchange for trade concessions. The Trump administration had previously shown a willingness to soften trade conditions, such as tariffs, in exchange for massive investments within the United States, similar to Apple's commitment to invest $600 billion in local manufacturing.

However, unlike those broad deals, imposing a "export tax" on a specific company or sector is a rare precedent in the modern history of global corporations, and it may raise concerns for both the American business community and Chinese authorities alike.

In contrast, the U.S. plan is expected to face strong rejection from Beijing, which has recently expressed increasing opposition to the use of the H20 AI chip by Chinese companies. The idea of a "chip tax" does not seem to be welcomed in official circles there.

Beijing Attacks H20 Chips

In a sign of the Chinese stance, the "Youwantian" account on a social media platform, linked to China Central Television (CCTV) and the media arm that typically reflects leadership trends on trade issues, has sharply criticized the American chip, describing it as suffering from "alleged security vulnerabilities" and "inefficiency".

Jacob Fieldguiz, a researcher at the "Center for Security and Emerging Technologies" in Washington, described the recent arrangement between Washington and Beijing as "unprecedented" in the context of export controls, warning that it could undermine the security justifications on which U.S. export restrictions are based.

He added that this step "could weaken the U.S. position in negotiations with allies to impose parallel restrictions," indicating that international partners may lose faith in the seriousness of American decision-makers if they appear willing to bargain on security concerns for economic gains, whether for American companies or foreign governments.

For its part, Nvidia confirmed that it complies with U.S. export rules, stating that it has not shipped H20 chips to China for months, but it hopes that the rules will allow American companies to compete in the Chinese market. AMD did not respond to a request for comment from Bloomberg News.

The Financial Times reported the recent development, following a separate report indicating that the U.S. Department of Commerce began issuing licenses to export H20 last week, just days after Nvidia's CEO Jensen Huang met with President Trump.

Jensen Huang, Nvidia's CEO, has long pushed strongly to lift restrictions on exporting AI chips to China, insisting that isolating China will only slow the spread of American technology and encourage local competitors like "Huawei".

Hebi Chen, an analyst at "Vantage Markets" in Melbourne, described these restrictions as a "strategic negotiating tool" that enhances Washington's control over a vital tech sector during trade negotiations with Beijing.

She added, according to Bloomberg, that this obstacle to chip entry into China "is likely to deter Nvidia and AMD from deepening their expansion in the world's largest chip import market, while giving local producers a clear advantage in capturing market shares and accelerating innovation in the local semiconductor industry".

If Washington proceeds with imposing this tax, it is expected to bring in some funds to the U.S. treasury, but these will not be relatively large amounts. Nvidia and AMD confirmed that they need time to ramp up production of the products intended for the Chinese market, even if orders return to their previous levels—a fact that remains uncertain.

Lost Revenues

Nvidia achieved revenues of $4.6 billion from H20 chip sales during the fiscal quarter ending April 27, just days after new restrictions were imposed on exporting the AI processor to China.

The company reported that it could not ship an estimated $2.5 billion worth of H20 revenue to the Chinese market during that period due to these new rules, indicating that its potential sales to China would have exceeded $7 billion in that quarter. If sales return to that level, the U.S. government could make about $1 billion quarterly from the ongoing agreement with the two companies.

Morgan Stanley estimates that AMD could generate revenues between $3 billion and $5 billion in 2025 if the restrictions are lifted, noting that Chinese alternatives like Huawei's Ascend chips currently capture 20% to 30% of the domestic demand.

"The U.S. government clearly needs this money given its deficit and desire to collect tariffs," said V-Sern Ling, general manager at "Union Bank of Switzerland" in Singapore.

He added: "But the problem lies in China's allegations that the H20 chips contain backdoors, which may be a negotiating tactic to clarify that the country is not in urgent need of American chips."