The Art of the Quid Pro Quo
A few days ago, I found myself having to apologize to Mark Zuckerberg. As bad as his ass-kissing has been with the current administration and Donald Trump in particular, Tim Cook was able to one-up him by offering the President a literal gold bar. In a ceremony at the White House. In the Oval Office in front of the media, for all to see. We all know why Cook was doing it – a quid pro quo to get those pesky tariff threats to go away... for now – but it was no less stunning.
And now I must apologize to Cook, as now he too has been one-upped. As Demetri Sevastopulo and Michael Acton report:
Nvidia and AMD have agreed to give the US government 15 per cent of the revenues from chip sales in China, as part of an unusual arrangement with the Trump administration to obtain export licences for the semiconductors.
The two chipmakers agreed to the financial arrangement as a condition for obtaining export licences for the Chinese market that were granted last week, according to people familiar with the situation, including a US official.
The US official said Nvidia agreed to share 15 per cent of the revenues from H20 chip sales in China and AMD will provide the same percentage from MI308 chip revenues. Two people familiar with the arrangement said the Trump administration had not yet determined how to use the money.
Yes, we've gone from paying Trump compliments to paying Trump in gold bars to just straight-up paying him. I mean, sure, the money is technically going to the government – we think! – but Trump will get to decide how to use it. He could, say, buy more upgrades to Air Force One. Or more tacky gold shit in which to plaster the White House. A new Presidential golf course? Why not?
Just how much money are we talking here? As Tripp Mickle reports for The New York Times:
The deal agreed to last week could funnel more than $2 billion to the U.S. government. Nvidia was expected to sell more than $15 billion worth of its H20 chip to China through the end of the year, and AMD was expected to sell $800 million, according to Bernstein Research.
$2.8B for simply allowing NVIDIA and AMD to sell their wares in China? That's a nice little taste! Never mind all those national security concerns we've heard about endlessly for months from the Trump administration, there are deals to be done! Sure, they could just tariff the hell out of the sales, but why risk further pissing off China ahead of some important trade talks? Also, quid pro quo is much easier to execute with individual companies. Back to Sevastopulo and Acton:
The quid pro quo arrangement is unprecedented. According to export control experts, no US company has ever agreed to pay a portion of their revenues to obtain export licences. But the deal fits a pattern in the Trump administration where the president urges companies to take measures, such as domestic investments, for example, to prevent the imposition of tariffs in an effort to bring in jobs and revenue to America.
AMD did not respond to a request for comment. Nvidia did not deny that it had agreed to the arrangement. It said: “We follow rules the US government sets for our participation in worldwide markets.”
Translation: what choice do we have? Jensen Huang had tried making the argument that allowing chip sales in China would actually bolster the US position in AI, insuring American technology and companies remained at the forefront. And it seemed like that argument – at least for the less-powerful H20 chips – eventually won the day with Trump. And then the administration, despite saying NVIDIA was good to go, just decided it wouldn't issue the licenses to let the company sell those chips. So now they get that taste of the action and we're good to go. Huang probably better pray Trump doesn't alter the deal any further.
One more thing: while such an arrangement may be "unprecedented", now that the precedent has been set, you can bet it will not be the last! In fact, a certain deal that has been in the works for months and months also involving China – TikTok – is just sitting right there... Trump has been floating for the past year that in order for it to happen, the US would also need a piece of the action. This also seemed wild at the time – and now there's precedent for it! While it presumably won't be a cut of sales – but maybe?! – an ownership stake for... the US Treasury? Some other branch of government? It all seems more likely now.1 As do more quid pro quos...
1 Presumably, look for a "Golden Share" just like the administration got in the recent U.S. Steel/Nippon Steel deal. Trump was pretty excited about that deal: "We have a golden stock. We have a golden share, which I control, or the president controls. Now I’m a little concerned whoever the president might be, but that gives you total control."