Semiconductor chipmakers Nvidia and AMD have reached an unusual agreement to pay the U.S. government 15% of their revenue generated by chip sales in China. Javier David, business editor at The Dallas Morning News, joins with analysis.

San Francisco

Nvidia and AMD have reached an agreement with the U.S. government to pay 15% of their revenue from chip sales in China. This arrangement is a condition for the export licenses recently granted to the companies, and is considered highly unusual for publicly traded firms in the United States.

The policy aims to limit China's access to advanced chips for artificial intelligence development, while also generating substantial revenue for the U.S. government. Projections suggest that Nvidia could sell $15 billion and AMD $800 million worth of chips in China by the end of the year, potentially resulting in about $2 billion in government revenue if the agreement is fully implemented.

Details on U.S. revenue deal with Nvidia and AMD

Semiconductor chipmakers NVIDIA and AMD have reached an unusual agreement to pay the U.S. government 15 percent of their revenue generated by chip sales in China. The move is a condition of the export licenses to China that the companies were provided with last week. Javier Davide joins us now. He's a CBS News contributor, also business editor at the Dallas Morning News. Javier, thanks for being with us. You know, we're tossing around the words unusual, unprecedented. How unusual is it, though, for publicly traded companies to share revenue with the government in this country? Have we ever seen something like this before? Yeah, I mean, it's it's highly unusual, to be honest. It's kind of capitalism by quid pro quo or whatever. Hannibal Lecter once said to Clary Sterling at one time, it's like the tariff rates. Like it's another sort of cover charge that seems to be meted out by the government, sort of by fiat. And it has to be this has to be the first Republican White House in recent history to sort of stake a claim by making it more costly for both businesses and consumers. The ostensible purpose behind this is national security. It makes it harder for China to access critical chips that they need to build out its AI. But the end result is more money flowing to the federal government's coffers. And just to throw out a couple of numbers at you, NVIDIA is projected to sell about 15 billion dollars worth of this particular chip to the end of the year. AMD, about 800 million dollars worth of processors, according to Bernstein Research. So that translates into about two billion dollars worth of revenue for the U.S. government, if in fact this comes to pass. So it accomplishes a couple of purposes, which is rebalancing trade and sort of generating money. Uncle Sam needs to pay off his debts, generating a lot of money at that. And Javier, looking ahead here, the July consumer price index, it's going to be released tomorrow. The producer price index to be released on Thursday. So what is the Federal Reserve looking for here in order to possibly potentially lower interest rates in September? And how possible is that really? Yeah, so interestingly, this is the very first time, the first of the series that since the president fired the Bureau of Labor Statistics person who oversees this data. So, you know, if we can't trust the jobs data, can we trust inflation figures? But what investors are looking for is to see whether this run of benign price data can continue this or whether the lag from tariffs that eventually manifests itself. Wall Street is whispering a lot about stagflation. So investors are already running a Fed rate cut in the fall. It's far from guaranteed, but this will play into that thinking. People want to see something that solidifies that the Fed is really concerned about protecting jobs and is prepared to cut rates. All right. I'm sure we'll talk to you about those numbers later this week. Javier David, in the meantime, thank you very much.

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