August 14, 2025 • 18 mins
In an unusual deal, Nvidia and Advanced Micro Devices have agreed to pay the US government 15% of their revenue from AI chips they sell to China. The US has blocked the sale of other, more powerful chips to China on the basis of national security, but the exception underscores the Trump administration’s openness to make exceptions… if the price is right.
On today’s Big Take podcast, Bloomberg economic statecraft reporter Joe Deaux joins host Sarah Holder to explain the unprecedented nature of the deal, concerns about its legality and how it fits into Trump’s approach to trade with global competitors.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. For years, the US
government has restricted American chip companies from exporting their most
advanced semiconductors to China, hoping to curb China's rapidly growing
AI industry.
Speaker 2 (00:20):
These new rules will be announced, perhaps as early as
this week, to essentially strengthen the export restrictions on advanced
semiconductors in areas that China obviously wants to dominate.
Speaker 1 (00:32):
The strategy started when Joe Biden was president, and for
a time it was also embraced by President Donald Trump.
Speaker 2 (00:39):
Trump and his team are planning to expand efforts.
Speaker 3 (00:41):
To limit China's tech advancements, including tougher chip curbs.
Speaker 1 (00:46):
But this week Trump made a big exception. Shall we
negotiate a little deal? The President said he would let
two of the biggest US chip companies, Nvidia and Advanced
micro Devices or AMD, sell some of their less advanced
chip models to China. Again. But there's a catch. The
companies have agreed to share fifteen percent of the revenue
(01:08):
from those sales with the US government. I said, if
I'm going to do that, I want you to pay
US as a country. Something how unusual is a deal?
Speaker 4 (01:17):
Like this unprecedented.
Speaker 1 (01:19):
Jodo covers economic state craft for Bloomberg.
Speaker 4 (01:23):
There's this national security question and this like pay to
play question. I think the pay to play is pretty obvious, right,
Oh my gosh, We're gonna have to start paying a
fee to do business in China. But also does that
mean now that like anything's up for sale at the
right price.
Speaker 1 (01:38):
Trump's latest move isn't just being called unprecedented. Some trade
experts and US lawmakers are even questioning if it's legal.
Speaker 4 (01:49):
This is just another example and a long line of examples,
how the Trump administration is using policy to generate revenue
for the federal government in ways that have just never
been considered before.
Speaker 1 (02:08):
I'm Sarah Holder, and this is the big take from
Bloomberg News today on the show. Inside the deal that
would give the US government a cut of chip sales
to China. What it means for the global AI race
and for the future of free trade. If there's anything
we've learned about President Trump's economic strategy, it's that even
(02:31):
after he announces a deal, the deal's terms often continue
to shift. So I asked Jodo to walk us through
what we know and what we don't yet know about
the agreement the federal government has made with two major
US chip manufacturers, Nvidia and AMD.
Speaker 4 (02:49):
What the President has told the American people is he
cut a deal with AMD and Nvidia. And you know,
the President said, listen, these two companies have greed with
me to give us fifteen percent of their revenue generated
from chip sales to China. Now, specifically, it's a chip
(03:10):
technology that's not their top of the line. It is
like one of their secondary or tertiary chips.
Speaker 1 (03:18):
In Vidia's lower tier chip is called the H twenty.
The company actually developed the model specifically for the Chinese
market to comply with the Biden administration's export controls. AMD
has its own version, too, called the m I THREEH eight.
These chips are still powerful, but Trump officials have downplayed
their national security implications, noting they're not as powerful as
(03:41):
some other models.
Speaker 4 (03:42):
The Blackwell chips that in Vidia makes are like the
Crem Dela Creme, the Rolls Royce, if you will.
Speaker 1 (03:49):
Those Blackwell chips aren't eligible for the administration's carve out,
at least not yet. This week, Trump signaled he would
be open to future deals that allow Nvidia to sell
a less sophisticated version of the Blackwell to China. But
it's a pretty stark reversal from a stance that both
Trump and former President Biden have helped that in order
(04:10):
to keep the US ahead in the AI race and
to prevent China from developing everything from missiles to cyber
warfare capabilities, the US has to hold on to its
advanced chip tech.
Speaker 4 (04:23):
I think it goes to the basic AI kind of
revolution that we're seeing. The United States is the forefront
of these AI chips. I mean, we hear it feels
like every day just a NonStop news stream of well,
you know, Chat, schipt and all these other AI platforms
(04:43):
are changing work, They're changing the world, They're changing everything,
and the chip technology is progressing quickly and China isn't
where the United States is. There is always going to
be a concern among Hawks that whoa hold on We
considered China an adversary. Why should they have their hands
(05:04):
on technology that is ours that they could use to
advance their own.
Speaker 1 (05:08):
Technologies, Right, So the US government had a position before
that US companies should not be selling these tips to
China so that China could not get ahead of us
in the AI race.
Speaker 4 (05:19):
Yeah, I mean We went through this during the first
Trump administration and it was like these three oh one tariffs,
sectoral teriffs, right, Everything trade related for Trump during the
first administration was China overproduces, it has over capacity, which
creates gluts across all industries in the world, and so
we're going to shut China out of our market by
(05:41):
putting up these high tariff barriers. So this time, around
four years later, after the last Trump administration ended, those
tariff barriers were pretty much still intact, and the question
became like, well, how much higher can you make the barriers.
The President came out on April second and announced the
reciprocal tariffs that, as we all remember, caused a massive
(06:02):
freak out in global markets, and part of that was
announcing these almost absurd tariff numbers on China right over
one hundred percent. And the response that we saw from China,
the meaningful response two days later, was an announcement that
it had put export bans on rare earth materials and importantly,
(06:25):
these so called rare earth permanent magnets. That became a
big problem because you had aerospace companies, automobile companies, defense
related companies going to the White House and saying we
need these, and China knew this, and this became the
centerpiece of the trade negotiations between the United States and
(06:48):
China for the next few months. Our leverage in that
negotiation were the chip technologies.
Speaker 1 (06:55):
That meant tightening export controls on all US chips. US
companies would now need special permission to sell them to China.
Speaker 4 (07:04):
In other words, the Commerce Department issues export licenses on
sensitive technologies that it doesn't want other nations or adversarial
nations to necessarily have carte blanche access to.
Speaker 1 (07:18):
But over the past month, the Trump administration has started
to loosen its grip. Here's Commerce Secretary Howard Lutnik on
CNBC last month, right after the administration first signals it'd
be easing restrictions on certain chip sales.
Speaker 4 (07:32):
So we try to play that balance.
Speaker 2 (07:33):
We don't sell them our best stuff, not our second
best stuff, not even.
Speaker 4 (07:37):
Our third best. I think fourth best is where we've
come out that we're cool. So on some level, it
felt like the deal to cut a deal of a
fifteen percent revenue was a way of saying, hey, listen,
the trade off here is, yes, while we're giving these
chips to China, let's make some money on behalf of
the American people in these deals, right if you will.
(07:59):
That the trade off that the companies have to do
to do business in China is they give us a
nice little cut of that.
Speaker 1 (08:05):
Where is this revenue supposed to go?
Speaker 4 (08:07):
Don't know? Yeah, I mean that's a great question. It's
unclear where this money is going to go. I mean
I've talked to a number of experts who have spent
their lives covering sovereign wealth funds, and you know, sovereign
wealth funds are like pretty straightforward, right. It's a country
that generates revenue off of you know, oftentimes like a
(08:27):
natural resource that is highly abundant within the country. Sorry,
area is a great example, Right, So they make a
lot of money off of oil production. And so where
does all of that money go to. Well, let's put
it in a sovereign wealth fund, and let's deploy that
capital to invest in all sorts of other things for
the benefit of the country. The United States doesn't have
a cemern wealth fund. Donald Trump at the beginning of
(08:48):
his term said let's create one, and then effectively they
kind of put it on the back burner a few
months ago. But since then all of these new revenue streams,
supposed revenue streams have popped up, and the question is
starting to rise, like where will this money go?
Speaker 1 (09:05):
One of the biggest criticisms of this move is the
potential of the Pandora's box. It might open the idea
that this could open the door to other kinds of
pay to play relationships. What are other criticisms of this
move from trade experts?
Speaker 4 (09:19):
The export control question itself, which is export controls were
always viewed by trade experts as not a part of
trade negotiations. Export controls, export licenses are taken very seriously
by all countries because they are built around this idea
of how much of your own intellectual property do you
(09:41):
want to export to other nations. That is a serious
concern that has been a constant conversation among trade experts
now for months because at the core of this, this
AMD Nvidia revenue share is an export control license, right, Okay,
So to get your licenses you will give us a
fifteen percent cut.
Speaker 1 (10:01):
Is that legal?
Speaker 4 (10:02):
That's a major question. The House Select Committee on China's
chairman sent us a statement in which he questioned the
legality of doing this. I have heard other trade experts
who said there is a way around this, which is
you don't write into the actual export licenses that a
cut is going to the United States federal government. It
(10:23):
is written in the Constitution that you can't have export taxes,
But it feels like talking to a number of trade
experts and to a couple lawyers, it feels like you
can find a way around that. And ultimately a lot
of people keep saying, hey, it's up to Congress, like
if they actually do have a problem with this, they
(10:43):
have the ability to step in.
Speaker 1 (10:45):
How do you see this as part of Trump's recent
record of interfering with the way companies are doing business
or at least putting his thumb on the scale in
these kinds of business transactions.
Speaker 4 (10:57):
So we have this chips situation. We have of these
country level trade deals like the EU and Japan are
really good examples where there was like a quasi fund
attached to the back of it, slightly different, not a
revenue generation, but like the US Steel Nippon Steel deal
that kind of captured a lot of attention, an old
(11:18):
steelmaker being popped by a Japanese company. Nippon Steel, agreed
in the deal to happen to give Donald Trump a
golden share hymn, specifically in which the President of United
States would be able to make direct decisions in corporate matters.
Speaker 1 (11:36):
After the break the competing arguments over national security, why
US companies agreed to the President's deal to begin with,
and the ripple effect it could have on other industries
doing business in Trump's second term. I've been talking to
(11:58):
Bloomberg Economic state Craft reporter Joe do about the Trump
administrations deal with US chip companies to allow some sales
of their technology to China for a price. The original
argument for expert controls on chips to China was that
there were national security concerns and competition concerns. Right, have
those concerns gone away or is it just that other
(12:19):
motivations are outweighing them.
Speaker 4 (12:22):
They haven't gone away, and I think at play here
are different theories. So the CEO of Nvidia has kind
of argued, well, we need access to the Chinese market.
We should be a player there on a competitive level
and prove that we are number one. You know that
our chips are more in demand than what the Chinese
(12:45):
semiconductor industry can produce, and let us just go toe
to toe with them.
Speaker 1 (12:51):
In an interview with Bloomberg TV in May, and Nvidia's
CEO Jensen Huang argued that allowing Nvidia to sell chips
in China would help deepen country's reliance on US tech
and prevent Chinese competitors from getting ahead.
Speaker 4 (13:05):
Without American technology.
Speaker 3 (13:08):
The availability of Chinese technology will fill the market and.
Speaker 4 (13:13):
On some level, like from purely capital market standpoint, that
makes sense. But you know that's where politics and Wall
Street can never really separate themselves, and the national security
experts have a different point of view, which is like, well,
it's a little more nuanced than that.
Speaker 3 (13:30):
Right.
Speaker 4 (13:30):
That ignores the fact that sometimes other actors may not
have capital market interests at heart, right, they may have
their own ulterior motives. This is a great example of
seeing the profit maximizers but heads with the people always
considering the worst case scenario.
Speaker 1 (13:51):
What about how China has responded to this deal. Are
they eager to start buying AGE twenty chips from Nvidia again?
For example?
Speaker 4 (13:59):
I mean, we had some really nice reporting from some
of our colleagues who reported actually, right now, Chinese officials
are saying to not buy these chips, and it was
a question that our reporters on Bloomberg Television put in
front of Treasury Secretary Bestent. Hey, yeah, if you can't
sell into the Chinese market, then what does any of
(14:19):
that matter?
Speaker 1 (14:21):
And I mean for Nvidia, obviously it seems like they
want to continue to be able to sell their products
to as many people as possible. But why did they
agree to pay the federal government fifteen percent of their revenue?
Is that surprising to you? Is there any information about
their thought process?
Speaker 3 (14:38):
There?
Speaker 4 (14:39):
Absolutely If any company is still going out there saying
we're willing to give an x cut of our revenue
generated from sales in the open market to the federal
government in the United States like that, regardless of the company,
that to me is shocking. Why did they do it?
I mean, you know, I think you'd have to leave
(14:59):
it up to them. But the experts in the space say, listen,
if you're a company and you have a big market
in China and you have a president who is constantly
focused on decoupling from China and cutting China out of
your markets, that could be problematic.
Speaker 1 (15:19):
And Video does have a big market in China. In
the first quarter of this year, it said it made
four point six billion dollars in revenue from Age twenty
chips alone. The company said it could have made two
point five billion dollars more in revenue if export controls
hadn't been imposed at the end of April, and Joe
says that could explain in Video's calculus.
Speaker 4 (15:39):
Here are you willing to save that revenue stream by
giving concessions that would otherwise be just considered insane or
or just have no precedent, maybe because eighty five percent
still better than zero percent in the minds of these companies.
Speaker 1 (15:58):
Right, it goes against everything that we think is true
about trade and about business interests in some ways.
Speaker 4 (16:06):
Yeah, because I mean we've all taken like an ECO
one oh one course in our lives, whether it's like
in college or in high school, you probably took some
sort of economics study like this is not in the textbook, Joe, I.
Speaker 1 (16:20):
Want to end by looking closer at those potential ripple effects.
Treasury Secretary Scott Bessant was on Bloomberg TV this week
and he said he thought this model could be used
in other industries over time.
Speaker 4 (16:32):
Is it unique to Nvidia an empty or is this
a motto for other companies.
Speaker 3 (16:37):
I think we could see it in other industries over time.
I think, you know, right now this is unique, But
now that we have the model and the beta test,
why not expand it?
Speaker 1 (16:49):
What kinds of industries do you think the administration might
try to replicate this approach with and what are the implications.
Speaker 4 (16:56):
I have already heard at least one source saying that
they had had a client reach out to them asking
it if they should be concerned about a fee or
a pay to play. And I don't want to get
into what the market was, but it was definitely not
in the chips space, and it definitely wasn't even in
a space that like most people would think about on
a daily basis. But if somebody in a rather niche
(17:17):
market is asking that question, I mean, that's like, wow,
you know, that's kind of wild to me. I had
to source say to me, you know, the slippery slope
is the question for anybody you know on the trade space. Right,
So in a commerce, do you suddenly have a situation
where companies that are trying to get meetings with trade
(17:40):
agencies within the United States government, do they have to
pay a fee to get those meetings to have those conversations.
Is there a question about defense contracts? Do you suddenly
have to worry about the bidding process where there's going
to be an ask on behalf of the federal government
that to get a contract you have to give something
in return for that. These are all hypotheticals, right, This
(18:03):
is not happening. I want to be clear about that.
But like, those are the questions that come to mind,
and I think that you're going to see companies begin
to try to figure out themselves as the days move forward.
Speaker 1 (18:22):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from The Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com. Slash podcast offered. If you liked this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news. For years, the US
government has restricted American chip companies from exporting their most
advanced semiconductors to China, hoping to curb China's rapidly growing
AI industry.
Speaker 2 (00:20):
These new rules will be announced, perhaps as early as
this week, to essentially strengthen the export restrictions on advanced
semiconductors in areas that China obviously wants to dominate.
Speaker 1 (00:32):
The strategy started when Joe Biden was president, and for
a time it was also embraced by President Donald Trump.
Speaker 2 (00:39):
Trump and his team are planning to expand efforts.
Speaker 3 (00:41):
To limit China's tech advancements, including tougher chip curbs.
Speaker 1 (00:46):
But this week Trump made a big exception. Shall we
negotiate a little deal? The President said he would let
two of the biggest US chip companies, Nvidia and Advanced
micro Devices or AMD, sell some of their less advanced
chip models to China. Again. But there's a catch. The
companies have agreed to share fifteen percent of the revenue
(01:08):
from those sales with the US government. I said, if
I'm going to do that, I want you to pay
US as a country. Something how unusual is a deal?
Speaker 4 (01:17):
Like this unprecedented.
Speaker 1 (01:19):
Jodo covers economic state craft for Bloomberg.
Speaker 4 (01:23):
There's this national security question and this like pay to
play question. I think the pay to play is pretty obvious, right,
Oh my gosh, We're gonna have to start paying a
fee to do business in China. But also does that
mean now that like anything's up for sale at the
right price.
Speaker 1 (01:38):
Trump's latest move isn't just being called unprecedented. Some trade
experts and US lawmakers are even questioning if it's legal.
Speaker 4 (01:49):
This is just another example and a long line of examples,
how the Trump administration is using policy to generate revenue
for the federal government in ways that have just never
been considered before.
Speaker 1 (02:08):
I'm Sarah Holder, and this is the big take from
Bloomberg News today on the show. Inside the deal that
would give the US government a cut of chip sales
to China. What it means for the global AI race
and for the future of free trade. If there's anything
we've learned about President Trump's economic strategy, it's that even
(02:31):
after he announces a deal, the deal's terms often continue
to shift. So I asked Jodo to walk us through
what we know and what we don't yet know about
the agreement the federal government has made with two major
US chip manufacturers, Nvidia and AMD.
Speaker 4 (02:49):
What the President has told the American people is he
cut a deal with AMD and Nvidia. And you know,
the President said, listen, these two companies have greed with
me to give us fifteen percent of their revenue generated
from chip sales to China. Now, specifically, it's a chip
(03:10):
technology that's not their top of the line. It is
like one of their secondary or tertiary chips.
Speaker 1 (03:18):
In Vidia's lower tier chip is called the H twenty.
The company actually developed the model specifically for the Chinese
market to comply with the Biden administration's export controls. AMD
has its own version, too, called the m I THREEH eight.
These chips are still powerful, but Trump officials have downplayed
their national security implications, noting they're not as powerful as
(03:41):
some other models.
Speaker 4 (03:42):
The Blackwell chips that in Vidia makes are like the
Crem Dela Creme, the Rolls Royce, if you will.
Speaker 1 (03:49):
Those Blackwell chips aren't eligible for the administration's carve out,
at least not yet. This week, Trump signaled he would
be open to future deals that allow Nvidia to sell
a less sophisticated version of the Blackwell to China. But
it's a pretty stark reversal from a stance that both
Trump and former President Biden have helped that in order
(04:10):
to keep the US ahead in the AI race and
to prevent China from developing everything from missiles to cyber
warfare capabilities, the US has to hold on to its
advanced chip tech.
Speaker 4 (04:23):
I think it goes to the basic AI kind of
revolution that we're seeing. The United States is the forefront
of these AI chips. I mean, we hear it feels
like every day just a NonStop news stream of well,
you know, Chat, schipt and all these other AI platforms
(04:43):
are changing work, They're changing the world, They're changing everything,
and the chip technology is progressing quickly and China isn't
where the United States is. There is always going to
be a concern among Hawks that whoa hold on We
considered China an adversary. Why should they have their hands
(05:04):
on technology that is ours that they could use to
advance their own.
Speaker 1 (05:08):
Technologies, Right, So the US government had a position before
that US companies should not be selling these tips to
China so that China could not get ahead of us
in the AI race.
Speaker 4 (05:19):
Yeah, I mean We went through this during the first
Trump administration and it was like these three oh one tariffs,
sectoral teriffs, right, Everything trade related for Trump during the
first administration was China overproduces, it has over capacity, which
creates gluts across all industries in the world, and so
we're going to shut China out of our market by
(05:41):
putting up these high tariff barriers. So this time, around
four years later, after the last Trump administration ended, those
tariff barriers were pretty much still intact, and the question
became like, well, how much higher can you make the barriers.
The President came out on April second and announced the
reciprocal tariffs that, as we all remember, caused a massive
(06:02):
freak out in global markets, and part of that was
announcing these almost absurd tariff numbers on China right over
one hundred percent. And the response that we saw from China,
the meaningful response two days later, was an announcement that
it had put export bans on rare earth materials and importantly,
(06:25):
these so called rare earth permanent magnets. That became a
big problem because you had aerospace companies, automobile companies, defense
related companies going to the White House and saying we
need these, and China knew this, and this became the
centerpiece of the trade negotiations between the United States and
(06:48):
China for the next few months. Our leverage in that
negotiation were the chip technologies.
Speaker 1 (06:55):
That meant tightening export controls on all US chips. US
companies would now need special permission to sell them to China.
Speaker 4 (07:04):
In other words, the Commerce Department issues export licenses on
sensitive technologies that it doesn't want other nations or adversarial
nations to necessarily have carte blanche access to.
Speaker 1 (07:18):
But over the past month, the Trump administration has started
to loosen its grip. Here's Commerce Secretary Howard Lutnik on
CNBC last month, right after the administration first signals it'd
be easing restrictions on certain chip sales.
Speaker 4 (07:32):
So we try to play that balance.
Speaker 2 (07:33):
We don't sell them our best stuff, not our second
best stuff, not even.
Speaker 4 (07:37):
Our third best. I think fourth best is where we've
come out that we're cool. So on some level, it
felt like the deal to cut a deal of a
fifteen percent revenue was a way of saying, hey, listen,
the trade off here is, yes, while we're giving these
chips to China, let's make some money on behalf of
the American people in these deals, right if you will.
(07:59):
That the trade off that the companies have to do
to do business in China is they give us a
nice little cut of that.
Speaker 1 (08:05):
Where is this revenue supposed to go?
Speaker 4 (08:07):
Don't know? Yeah, I mean that's a great question. It's
unclear where this money is going to go. I mean
I've talked to a number of experts who have spent
their lives covering sovereign wealth funds, and you know, sovereign
wealth funds are like pretty straightforward, right. It's a country
that generates revenue off of you know, oftentimes like a
(08:27):
natural resource that is highly abundant within the country. Sorry,
area is a great example, Right, So they make a
lot of money off of oil production. And so where
does all of that money go to. Well, let's put
it in a sovereign wealth fund, and let's deploy that
capital to invest in all sorts of other things for
the benefit of the country. The United States doesn't have
a cemern wealth fund. Donald Trump at the beginning of
(08:48):
his term said let's create one, and then effectively they
kind of put it on the back burner a few
months ago. But since then all of these new revenue streams,
supposed revenue streams have popped up, and the question is
starting to rise, like where will this money go?
Speaker 1 (09:05):
One of the biggest criticisms of this move is the
potential of the Pandora's box. It might open the idea
that this could open the door to other kinds of
pay to play relationships. What are other criticisms of this
move from trade experts?
Speaker 4 (09:19):
The export control question itself, which is export controls were
always viewed by trade experts as not a part of
trade negotiations. Export controls, export licenses are taken very seriously
by all countries because they are built around this idea
of how much of your own intellectual property do you
(09:41):
want to export to other nations. That is a serious
concern that has been a constant conversation among trade experts
now for months because at the core of this, this
AMD Nvidia revenue share is an export control license, right, Okay,
So to get your licenses you will give us a
fifteen percent cut.
Speaker 1 (10:01):
Is that legal?
Speaker 4 (10:02):
That's a major question. The House Select Committee on China's
chairman sent us a statement in which he questioned the
legality of doing this. I have heard other trade experts
who said there is a way around this, which is
you don't write into the actual export licenses that a
cut is going to the United States federal government. It
(10:23):
is written in the Constitution that you can't have export taxes,
But it feels like talking to a number of trade
experts and to a couple lawyers, it feels like you
can find a way around that. And ultimately a lot
of people keep saying, hey, it's up to Congress, like
if they actually do have a problem with this, they
(10:43):
have the ability to step in.
Speaker 1 (10:45):
How do you see this as part of Trump's recent
record of interfering with the way companies are doing business
or at least putting his thumb on the scale in
these kinds of business transactions.
Speaker 4 (10:57):
So we have this chips situation. We have of these
country level trade deals like the EU and Japan are
really good examples where there was like a quasi fund
attached to the back of it, slightly different, not a
revenue generation, but like the US Steel Nippon Steel deal
that kind of captured a lot of attention, an old
(11:18):
steelmaker being popped by a Japanese company. Nippon Steel, agreed
in the deal to happen to give Donald Trump a
golden share hymn, specifically in which the President of United
States would be able to make direct decisions in corporate matters.
Speaker 1 (11:36):
After the break the competing arguments over national security, why
US companies agreed to the President's deal to begin with,
and the ripple effect it could have on other industries
doing business in Trump's second term. I've been talking to
(11:58):
Bloomberg Economic state Craft reporter Joe do about the Trump
administrations deal with US chip companies to allow some sales
of their technology to China for a price. The original
argument for expert controls on chips to China was that
there were national security concerns and competition concerns. Right, have
those concerns gone away or is it just that other
(12:19):
motivations are outweighing them.
Speaker 4 (12:22):
They haven't gone away, and I think at play here
are different theories. So the CEO of Nvidia has kind
of argued, well, we need access to the Chinese market.
We should be a player there on a competitive level
and prove that we are number one. You know that
our chips are more in demand than what the Chinese
(12:45):
semiconductor industry can produce, and let us just go toe
to toe with them.
Speaker 1 (12:51):
In an interview with Bloomberg TV in May, and Nvidia's
CEO Jensen Huang argued that allowing Nvidia to sell chips
in China would help deepen country's reliance on US tech
and prevent Chinese competitors from getting ahead.
Speaker 4 (13:05):
Without American technology.
Speaker 3 (13:08):
The availability of Chinese technology will fill the market and.
Speaker 4 (13:13):
On some level, like from purely capital market standpoint, that
makes sense. But you know that's where politics and Wall
Street can never really separate themselves, and the national security
experts have a different point of view, which is like, well,
it's a little more nuanced than that.
Speaker 3 (13:30):
Right.
Speaker 4 (13:30):
That ignores the fact that sometimes other actors may not
have capital market interests at heart, right, they may have
their own ulterior motives. This is a great example of
seeing the profit maximizers but heads with the people always
considering the worst case scenario.
Speaker 1 (13:51):
What about how China has responded to this deal. Are
they eager to start buying AGE twenty chips from Nvidia again?
For example?
Speaker 4 (13:59):
I mean, we had some really nice reporting from some
of our colleagues who reported actually, right now, Chinese officials
are saying to not buy these chips, and it was
a question that our reporters on Bloomberg Television put in
front of Treasury Secretary Bestent. Hey, yeah, if you can't
sell into the Chinese market, then what does any of
(14:19):
that matter?
Speaker 1 (14:21):
And I mean for Nvidia, obviously it seems like they
want to continue to be able to sell their products
to as many people as possible. But why did they
agree to pay the federal government fifteen percent of their revenue?
Is that surprising to you? Is there any information about
their thought process?
Speaker 3 (14:38):
There?
Speaker 4 (14:39):
Absolutely If any company is still going out there saying
we're willing to give an x cut of our revenue
generated from sales in the open market to the federal
government in the United States like that, regardless of the company,
that to me is shocking. Why did they do it?
I mean, you know, I think you'd have to leave
(14:59):
it up to them. But the experts in the space say, listen,
if you're a company and you have a big market
in China and you have a president who is constantly
focused on decoupling from China and cutting China out of
your markets, that could be problematic.
Speaker 1 (15:19):
And Video does have a big market in China. In
the first quarter of this year, it said it made
four point six billion dollars in revenue from Age twenty
chips alone. The company said it could have made two
point five billion dollars more in revenue if export controls
hadn't been imposed at the end of April, and Joe
says that could explain in Video's calculus.
Speaker 4 (15:39):
Here are you willing to save that revenue stream by
giving concessions that would otherwise be just considered insane or
or just have no precedent, maybe because eighty five percent
still better than zero percent in the minds of these companies.
Speaker 1 (15:58):
Right, it goes against everything that we think is true
about trade and about business interests in some ways.
Speaker 4 (16:06):
Yeah, because I mean we've all taken like an ECO
one oh one course in our lives, whether it's like
in college or in high school, you probably took some
sort of economics study like this is not in the textbook, Joe, I.
Speaker 1 (16:20):
Want to end by looking closer at those potential ripple effects.
Treasury Secretary Scott Bessant was on Bloomberg TV this week
and he said he thought this model could be used
in other industries over time.
Speaker 4 (16:32):
Is it unique to Nvidia an empty or is this
a motto for other companies.
Speaker 3 (16:37):
I think we could see it in other industries over time.
I think, you know, right now this is unique, But
now that we have the model and the beta test,
why not expand it?
Speaker 1 (16:49):
What kinds of industries do you think the administration might
try to replicate this approach with and what are the implications.
Speaker 4 (16:56):
I have already heard at least one source saying that
they had had a client reach out to them asking
it if they should be concerned about a fee or
a pay to play. And I don't want to get
into what the market was, but it was definitely not
in the chips space, and it definitely wasn't even in
a space that like most people would think about on
a daily basis. But if somebody in a rather niche
(17:17):
market is asking that question, I mean, that's like, wow,
you know, that's kind of wild to me. I had
to source say to me, you know, the slippery slope
is the question for anybody you know on the trade space. Right,
So in a commerce, do you suddenly have a situation
where companies that are trying to get meetings with trade
(17:40):
agencies within the United States government, do they have to
pay a fee to get those meetings to have those conversations.
Is there a question about defense contracts? Do you suddenly
have to worry about the bidding process where there's going
to be an ask on behalf of the federal government
that to get a contract you have to give something
in return for that. These are all hypotheticals, right, This
(18:03):
is not happening. I want to be clear about that.
But like, those are the questions that come to mind,
and I think that you're going to see companies begin
to try to figure out themselves as the days move forward.
Speaker 1 (18:22):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
To get more from The Big Take and unlimited access
to all of Bloomberg dot com, subscribe today at Bloomberg
dot com. Slash podcast offered. If you liked this episode,
make sure to follow and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks for listening. We'll be back tomorrow
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