Nvidia still hasn't finalized deal to kick 15% of some China chip sales back to the US government Laura BrattonAugust 28, 2025 at 1:04 AM Nvidia (NVDA) said Wednesday that the US government has not finalized a recent agreement that would require the AI chipmaker to share 15% of the revenue from sale...
- - Nvidia still hasn't finalized deal to kick 15% of some China chip sales back to the US government
Laura BrattonAugust 28, 2025 at 1:04 AM
Nvidia (NVDA) said Wednesday that the US government has not finalized a recent agreement that would require the AI chipmaker to share 15% of the revenue from sales of its H20 chips to China in exchange for export licenses.
"[US government] officials have expressed an expectation that the USG will receive 15% of the revenue generated from licensed H20 sales," Nvidia CFO Colette Kress said in a call following Nvidia's second quarter earnings results. "But to date, the USG has not published a regulation codifying such a requirement."
Nvidia was hit with a surprise export ban on sales of its H20 chips to China in April — a move that cost the chipmaker $2.5 billion in lost sales and $4.5 billion in inventory in the first quarter.
But the Trump administration said in July it would grant Nvidia export licenses for the H20 chips in exchange for 15% of the revenue from those sales. The government's unprecedented agreement with Nvidia is likely to face legal challenges due to the US Constitution's ban on export taxes — a risk Nvidia acknowledged in its quarterly filing with the SEC.
"Any request for a percentage of the revenue by the USG may subject us to litigation, increase our costs, and harm our competitive position and benefit competitors that are not subject to such arrangements," the company said in its filing.
While "a select number" of the chipmaker's Chinese customers received licenses to buy the lower-power Nvidia chips in the past few weeks, the company hasn't made any H20 sales based on those licenses.
"We're still waiting on several of the geopolitical issues going back and forth between the governments and the companies trying to determine their purchases and what they want to do," Kress said.
"If geopolitical issues reside, we should ship $2 [billion] to $5 billion in H20 revenue in Q3, and if we had more orders, we can bill more," Kress said.
Given that Nvidia made no H20 sales in the second quarter, the chipmaker's China revenue dove to $2.8 billion during the three months that ended July 27, down from $5.5 billion in the first quarter and $3.7 billion last year. On average, China accounted for roughly 15% of the company's revenue over the prior 10 quarters. In the second quarter, that share fell to 5.9%.
Nvidia began sales of its H20 GPUs (graphics processing units) — less powerful versions of its prior-generation Hopper chips compliant with tightening US trade rules — to China in 2024.
Kress told analysts the US government began reviewing licenses for sales of the H20 chips to China in late July.
China is one of Nvidia's largest markets, behind the US, Singapore, and Taiwan.
DA Davidson analyst Gil Luria estimates, however, that as much as 40% of the company's revenue may come from Chinese companies purchasing its chips and equipment indirectly, for instance, buying semiconductors through resellers elsewhere in Asia.
Analysts had moderated their expectations about Nvidia's future in China heading into Wednesday's report as the Chinese government ramped up pressure on tech companies to buy chips domestically.
Last week, Nvidia reportedly asked its suppliers to halt production of components for its H20 chips. The news came after the Information reported that China ordered tech companies to suspend their purchases of Nvidia's GPUs. The same day, a conflicting report from Reuters said authorities were questioning Chinese companies over their orders of H20 chips, but not ordering them to stop those purchases.
As drama surrounding its H20 chips unfolds, Nvidia is working on new AI chips for China using its latest Blackwell architecture.
"I think the opportunity for us to bring Blackwell to the China market is a real possibility," CEO Jensen Huang said in the post-earnings call. Huang also reiterated his belief in the importance of China's AI market, which he said is worth $50 billion.
" If it's $50 billion this year, you would expect it to grow, say, 50% per year," he added. " It is the second-largest computing market in the world."
"We're talking to the administration about the importance of US companies to be able to address the Chinese market."
Nvidia stock fell 3% after its results posted late Wednesday, with revenue in its key data center segment slightly missing forecasts.
CEO of Nvidia Jensen Huang speaks during a press conference at the Mandarin Oriental Qianmen after attending the third China International Supply Chain Expo in Beijing on July 16, 2025. (AP Photo/Andy Wong) ()
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at [email protected].
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