In a groundbreaking move that blends trade policy with technological dominance, Nvidia Corp. and Advanced Micro Devices Inc. (AMD) have reportedly struck an unusual deal with the U.S. government to resume selling advanced AI chips to China. Under the agreement, the companies would hand over 15% of their profits from these sales directly to federal coffers, securing export licenses that had been stalled amid escalating tensions.

This arrangement, first detailed in a report by Engadget, marks a departure from traditional export controls, where restrictions typically focus on outright bans or technical limitations rather than revenue-sharing mandates. Nvidia’s H20 AI GPUs, specifically downgraded to comply with U.S. rules, are at the center of this pact, following earlier blocks on more powerful models like the A800 and H800.

An Unprecedented Revenue Split

The profit-sharing clause emerged from negotiations that underscore the Trump administration’s aggressive stance on tech exports, as noted in coverage from The New York Times. Insiders familiar with the talks, cited in the Engadget piece, revealed that both Nvidia and AMD received approvals last week for chips like the H20 and MI308, but only after agreeing to the 15% cut.

For Nvidia, this could translate to substantial payments given China’s voracious appetite for AI hardware, even as the company navigates a black market rife with smuggled goods. A separate investigation by CNBC highlighted how billions in restricted chips have flowed into China via Southeast Asian hubs, circumventing bans and fueling underground repair services, as reported by Reuters.

National Security Concerns Loom

Critics within national security circles argue that easing access, even with a financial toll, risks accelerating China’s AI capabilities, potentially at the expense of U.S. interests. An opinion piece in The New York Times warned that American-made chips could train systems targeting U.S. personnel, echoing broader debates on export ethics.

AMD’s involvement adds another layer, with its MI308 chip poised to capture market share in a region where demand for AI infrastructure remains insatiable. Analysts quoted in Yahoo Finance suggest the deal could generate billions in revenue for the chipmakers, offsetting the 15% levy while providing the U.S. government with a novel funding stream for tech initiatives.

Broader Implications for Global Trade

This profit-sharing model, likened to a de facto export tax by observers in Gizmodo, may set a precedent for future U.S.-China tech dealings, especially as negotiations touch on rare earths and other critical materials, per Reuters. For industry executives, it represents a pragmatic compromise: access to China’s market in exchange for a slice of earnings, amid warnings from Chinese state media about over-reliance on U.S. suppliers, as covered by CNN.

Yet, the arrangement has sparked unease among experts, with some in Firstpost questioning its long-term viability. If successful, it could reshape how governments monetize technological edges, but failure might intensify smuggling and regulatory crackdowns, further straining global supply chains.

Looking Ahead in the AI Arms Race

As Chinese firms showcase AI advancements at events like those in Shanghai, detailed in The New York Times, the influx of sanctioned chips—legal or otherwise—promises to accelerate progress. Nvidia’s CEO Jensen Huang has publicly navigated these waters, emphasizing compliance while eyeing resumed sales.

Ultimately, this deal reflects the high-stakes balancing act between economic gains and strategic risks, with the U.S. leveraging financial incentives to maintain oversight in an increasingly contested domain. Industry watchers will closely monitor its execution, as it could redefine profit models in the global tech arena.