US Government profits from AI chip sales to China
Introduction
In a highly unusual move, tech giants Nvidia and AMD have agreed to pay the U.S. government 15% of their sales of A.I. chips to China. This arrangement marks a significant shift in U.S. tech export controls, as they are typically based on national security concerns rather than financial gain for the government.
Key Details
The decision to impose a 15% tax on chip sales to China is a response to growing concerns over China's investment in advanced technology. The U.S. government fears that China may use these chips for military purposes and pose a threat to national security. This move also reflects the ongoing trade tensions between the U.S. and China, as the U.S. government seeks to limit China's access to advanced technology.
This agreement is also a significant departure from traditional U.S. export control policies, which have focused on safeguarding national security interests. Instead, the government is now looking to capitalize on the lucrative A.I. market and generate revenue through taxes on chip sales.
Impact
The impact of this decision is far-reaching, not only for the tech companies involved but also for the U.S. government's trade policies. The requirement for companies to pay a percentage of their sales to the government may discourage them from doing business with China, limiting the country's access to advanced technology. It also sets a
About the Organizations Mentioned
US Government
The **U.S. Government**, formally known as the Federal Government of the United States, is the national governing authority established by the U.S. Constitution, which has been in continuous effect since 1789[1][2]. It is composed of **three branches**—the legislative, executive, and judicial—each with distinct powers designed to ensure a system of checks and balances that prevents any single branch from gaining too much power[1][2]. The legislative branch, represented by the bicameral Congress (House of Representatives and Senate), creates laws. The executive branch, led by the President, enforces laws and manages federal agencies. The judicial branch, headed by the Supreme Court, interprets laws and can overturn those that violate the Constitution[1][2]. The federal government shares sovereignty with the 50 states and recognizes Indigenous tribes' sovereign powers, reflecting a complex balance of authority[1]. Its foundational document, the Constitution, including the Bill of Rights, guarantees fundamental freedoms such as speech, religion, and the right to bear arms, shaping American civil liberties[3]. Historically, the U.S. Government was created to unify the states under a federal system that balances power across branches and levels of government, fostering stability and democratic governance for over two centuries[1]. Key achievements include establishing a stable federal republic, creating a system that has adapted through amendments and legislation, and maintaining global leadership in technology, business, and innovation through federal policies and agencies. In the contemporary context, the government continues to evolve amid challenges such as public trust issues and political polarization[8]. It oversees vast operations spanning defense, economic policy, technology regulation, and public services. Recent political agendas, such as Project 2025, illustrate ongoing debates over executive power and government structure, highlighting tensions around federal authority and civil liberties[5][10]. Notably, the U.S. Government’s structure serves as a model for state governments and influences democratic institutions worldwide. Its role in regulating technology, business,
Nvidia
Nvidia Corporation, founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem and headquartered in Santa Clara, California, is a pioneering American technology company best known for inventing the graphics processing unit (GPU) in 1999[1][2][4]. Initially focused on GPUs for video gaming, Nvidia has expanded its scope to serve diverse markets, including artificial intelligence (AI), high-performance computing (HPC), professional visualization, automotive technology, and mobile devices[1][3]. Nvidia’s GPUs, such as the GeForce series for gamers and the RTX series for professional applications, are central to its dominance, controlling over 90% of the discrete GPU market as of early 2025[1][4]. The company’s investment in CUDA, a parallel computing platform and API launched in the early 2000s, revolutionized GPU computing by enabling GPUs to accelerate a wide range of compute-intensive tasks, particularly in AI and scientific research[1][4]. By 2025, Nvidia commanded over 80% of the GPU market for AI training and inference and supplied chips to more than 75% of the world’s top 500 supercomputers[1]. Nvidia’s influence extends beyond hardware. It offers a comprehensive ecosystem including software platforms like Omniverse for 3D simulation and digital twins, AI frameworks such as MONAI for medical imaging, and Jetson for robotics and edge AI[2][3]. Its technologies power autonomous vehicle data centers, AI factories, and cloud gaming services like GeForce Now[2][7]. Financially, Nvidia achieved record full-year revenue of $130.5 billion in fiscal 2025, with a workforce of over 36,000 employees worldwide and a robust patent portfolio exceeding 8,700 applications[2]. The company is recognized for innovation and workplace excellence, topping Forbes’ "America’s Best Companies 2025" and Fast Company’s "World’s Most Innovative Companies"
AMD
Advanced Micro Devices, Inc. (AMD) is a leading American multinational technology company specializing in high-performance computing and adaptive technologies. Headquartered in Santa Clara, California, with major operations in Austin, Texas, AMD designs and develops central processing units (CPUs), graphics processing units (GPUs), field-programmable gate arrays (FPGAs), system-on-chips (SoCs), and other high-performance components used across a broad spectrum of markets including gaming, data centers, artificial intelligence (AI), and embedded systems[1][2]. Founded in 1969 by Jerry Sanders and colleagues, AMD started as a Silicon Valley startup focused on memory chips and gradually entered the microprocessor market in 1975, becoming a primary competitor to Intel[1]. The company's early success included the Athlon and Opteron processors in the early 2000s, which solidified its presence in the PC and server markets. However, AMD faced challenges competing with Intel in the late 2000s and early 2010s but rebounded strongly with innovations in processor architecture and graphics technology[1]. A major milestone in AMD’s recent history was its acquisition of Xilinx in 2022, expanding its portfolio into FPGAs and enhancing its capabilities in adaptive computing[1]. In October 2025, AMD announced a strategic partnership with OpenAI to supply six gigawatts of AI processors over five years, underscoring its critical role in powering AI infrastructure and advancing the AI ecosystem[1][3]. AMD is recognized for driving innovation in high-performance computing and adaptive technologies. It emphasizes corporate responsibility, inclusivity, and energy-efficient computing, fostering a culture of innovation and execution excellence[2]. Despite recent challenges in data center revenue growth compared to competitors like Nvidia, AMD continues to be a key player with a premium market valuation and strong potential in next-generation computing technologies[4][5]. Overall, AMD stands as a transformative force in technology, delivering cutting-edge products that shape gaming,
