US-Nvidia Chip Revenue-Sharing Deal Is 'as Clear as Mud,' Former Official Says

“The best we can tell, they're still working on the details and the final print,” said Craig Singleton, senior director for China at the Foundation for Defense of Democracies and a former U.S. official who worked on China-related national security issues. “We haven't seen an actual legal determination that this 15% profit-sharing agreement is, in fact, legal.”

The administration announced the deal earlier this month, saying the U.S. planned to allow Nvidia and potentially other companies to ship certain advanced AI chips to China in exchange for the U.S. government keeping 15% of the profits from those sales (see 2508110044 and 2508130039).

But Nvidia hasn’t yet publicly confirmed that it’s being granted export licenses to sell those chips, and the administration has given little detail about the arrangement. Several former officials and U.S. lawmakers have questioned whether the deal is legal (see 2508150034).

“Whether the chips are flowing and the licenses are approved -- again, I think we're all sort of piecing it together,” Singleton said last week on the NatSec Matters podcast, hosted by Beacon Global Strategies. “It's about as clear as mud.”

Singleton called the arrangement “troubling,” saying it shows that the U.S. appears to be willing to budge on national security concerns to boost trade.

“It monetizes risk,” he said. “It turns export controls into a toll that tells Beijing and industry that, at the right price, advanced U.S. compute can flow to China.”

Singleton noted that the Trump administration appears eager to depart from the complex chip export control regulations issued under the Biden administration, especially the AI diffusion rule. That regulation received widespread criticism from U.S. allies, who said it arbitrarily set limits on which countries can access advanced U.S. chips (see 2505130018). The Biden administration “maybe in certain cases overthought some of those questions,” Singleton said, and “maybe the pendulum has swung a little too far today where there's a sense that perhaps export controls don't work.”

Singleton argued that they do work, adding that chip export controls protect America's technological edge by “targeting all the choke points that will decide which country is going to win the AI race. It steers U.S. capability away from high-risk users, including the People's Liberation Army, while I think raising some serious costs for China and stretching its innovation timelines.”

But instead of stopping shipments of Nvidia’s H20 chips to China, “it does seem like we're developing some sort of ... niche and bespoke series of carve-outs for certain companies like Nvidia at the same time that we are relinquishing a lot of our leverage on supply chain and export controls in exchange for seemingly nothing,” Singleton said.

Administration officials have defended the H20 sales by calling the chip “heavily deprecated” and stressing that the U.S. continues to restrict exports of the most state-of-the-art American technology (see 2507280012). But Singleton said that argument “really misses the point,” because the H20 still “leapfrogs anything that China can build on its own, or at least that we know about.”

He said the U.S. should ask itself whether it wants to “willingly provide this cutting-edge technology to an adversary that is so clearly and explicitly weaponizing it” to modernize its military. “Those are real risks, and there's plenty of evidence to show that these chips have ended up in China's military,” Singleton said. “Ultimately, we would have to ask ourselves: Why would we do that?”

He also said the export control carve-out for Nvidia will “confuse” U.S. allies, many of whom have been urged by the government not to sell their advanced technology to China.

“We tell them not to sell into China's compute stack, and then we appear to greenlight U.S. sales,” he said. “That whiplash invites a lot of hedging that I think is really counterproductive to U.S. national security long term.”