In an unprecedented “revenue-sharing” deal, tech developers Nvidia and Advanced Micro Devices agreed to remit 15% of their revenue from artificial intelligence chips sold into China to the U.S. government. In exchange, the companies will be granted export licenses for advanced chips previously banned from sales into China, one of the most lucrative markets for the products and a major national security concern.

Specifically, the deal covers chip giant Nvidia’s H20 chip and AMD’s MI308 chip. The graphic processing units in question are widely seen as preferable to competitors’ offerings for AI work because of their ability to more efficiently process the large amount of data needed for machine-learning tasks.

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Analysts note the revenue produced from the arrangement could mean billions of dollars for federal coffers, with Nvidia providing the lion’s share.

The arrangement is controversial because, unlike conventional export restrictions, typically a sanction or a ban, this model effectively turns the United States into a direct financial beneficiary of private companies’ sales.

Some experts warn that the deal is so novel that it may be headed to court. Opponents argue that neither the president nor Congress has the legal authority to tax exports, citing the so-called export clause of the Constitution that says, “No Tax or Duty shall be laid on Articles exported from any State.” The Supreme Court struck down a different export charge arrangement in 1998, saying a congressionally approved “user fee” on commercial cargo passing out of U.S. ports was still unconstitutional because it “bears the indicia of a tax.”

While not precisely a tax either, the Nvidia and AMD deal may be headed for a similar fate if challenged. Furthermore, during President Donald Trump‘s first term, he and Congress enacted the Export Controls Reform Act of 2018, which explicitly bans exchanging fees for export licenses.

It remains to be seen who might mount a legal challenge and how long it would take to resolve. In the meantime, Nvidia and AMD will be able to access a very profitable portion of the global market previously unavailable to them.

In addition to questions of constitutionality, the deal is raising national security concerns about blurring the lines between economic incentives and the U.S.’s broader global interests. The U.S. is locked in a global race for AI dominance with China. Maintaining the lead in AI has implications for military superiority, economic success, global influence in setting technical standards, and spreading democratic or authoritarian values.

Some national security experts argue that this deal degrades the U.S.’s crucial pressure point advantage in the hardware portion of the AI race with China. While these chips won’t allow China to level up with U.S. manufacturing capabilities completely — the machine needed to make the world’s fastest chips is not sold to Chinese companies because of pressure from the U.S. government — it will likely lessen the gap.

National security advocates tout export agreements for different levels of chips to various countries based on security measures and diplomatic relations. They claim that would quell China’s ability to supply those markets, allowing U.S. chips to remain the product of choice.

Beyond national security and constitutional concerns, the more fundamental question of how effective export controls were while they were in place remains. The Financial Times reported last month that at least a billion dollars’ worth of Nvidia chips were sent to China in the three months after Trump tightened export controls. Earlier this year, the Wall Street Journal reported that traders were selling banned chips in China by routing them through third parties in nearby regions. The Chinese black market for U.S. semiconductors is frequently described as “rampant.”

The practical limitations of what Washington, D.C., could keep out of Beijing’s hands may make the latest revenue-sharing export deal more palatable to some. However, others saw fundamental problems with export restrictions to China from the beginning. 

“At best, export controls shore up a short‑term U.S. edge, but they risk undermining the U.S.’s long‑term dominance of the AI space,” Neil Chilson of the Abundance Institute told the Washington Examiner.

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Chilson argued that restricting U.S. chip exports beyond the level that prevents China from developing its manufacturing capabilities shields Chinese chip firms from U.S. competition. This inadvertently creates a captive Chinese domestic market that subsidizes the country’s effort to build a full manufacturing supply chain.

“Why are we protecting Chinese companies from competition?” Chilson asked.

Jessica Melugin is the director of the Center for Technology and Innovation at the Competitive Enterprise Institute and a 2025 Innovators Network Foundation antitrust and competition policy fellow.