Welcome to the CAVEAT Weekly Newsletter, where we break down some of the major developments and happenings occurring worldwide when discussing cybersecurity, privacy, digital surveillance, and technology policy.
At 1,450 words, this briefing is about a 7-minute read.
At a glance.
- Nvidia and AMD pay a percentage of their Chinese chip sales revenue to the US.
- The US is using trackers to catch AI chip diversions.
Chipmakers pay 15% of their China sales to the US.
The news.
On Sunday, the United States (US) announced that it has reached an agreement with both Nvidia and Advanced Micro Devices (AMD). This agreement involves both companies agreeing to pay the US government fifteen percent of their revenue from specific computer chip sales to China. With this deal, US officials emphasized that allowing the sale of these specific advanced chips will not compromise national security; however, it is unclear when this agreement is set to be implemented.
While the Constitution does prohibit Congress from imposing taxes on exported articles, this deal aims to qualify as a “user fee,” rather than a tax.
Nvidia responded to this news, stating:
“We follow rules the US government sets for our participation in worldwide markets. While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide.”
AMD also stated that the US approved its export of some artificial intelligence (AI) processors to China, but did not address this revenue-sharing agreement.
The knowledge.
This deal comes after the US and its chip-making companies have gone back and forth regarding the sale of chips to China for several years. Throughout the former Biden administration, the US government gradually implemented greater export controls on US chip manufacturers to ensure that the nation’s most advanced technologies remained in the hands of the US and only its closest allies. Alongside restricting exports, the former Biden administration barred companies from sending chips to countries of concern, such as China, arguing the matter was one of national security. Alongside restricting exporting efforts, the former Biden administration also required chip exporters to abide by strict export restrictions that limited the volumes of chips that could be sold and required specific licensing requirements. However, despite the overwhelming bipartisan support these restrictions had, the Trump administration has signaled a changing policy stance.
In May 2025, the Department of Commerce (DOC) rolled back many of the former administration's chip-related export controls. Arguing that these restrictions would have stifled innovation and created too many regulatory requirements, the DOC repealed these restrictions. While the Trump administration initially kept many of the Chinese export restrictions in place, the Trump administration has signaled a change on this when it gave Nvidia and AMD permission to sell their advanced AI chips to China. Notably, the Trump administration has emphasized that this change does not permit chip makers to export their most advanced chips to China.
This laxing of policy has drawn concerns from lawmakers. Congressman Raja Krishnamoorthi stated that this change “would not only hand our foreign adversaries our most advanced technologies, but is also dangerously inconsistent with this administration’s previously-stated position on export controls for China.”
The impact.
If implemented, this revenue-sharing model would mark the first time the US government has tied exporting efforts to direct payments. Given the contentious nature surrounding exporting advanced chips to China, it is no surprise that the lawmakers are concerned that normalizing deals like this could weaken national security and set a precedent for other industries.
For those operating within the national security space, AI, or chip-making, people should be aware that this matter remains highly contentious and policies are changing rapidly. By understanding the motivations and policies of key stakeholders, lawmakers, and the Trump administration, people will be better able to adapt to these changes and mitigate any risks.
US embedding trackers into AI chip shipments.
The news.
On Wednesday, reports revealed that the US has been embedding tracking devices into select shipments of advanced AI chips. These shipments were specifically selected given their high risks of being targeted for illegal diversion.
While not confirmed by the Trump administration, this effort would follow through on the administration’s previous recommendation to implement location verification controls on AI chips. This recommendation was outlined in the AI Action Plan. The administration wrote that it would “explore leveraging new and existing location verification features on advanced AI computers to ensure that the chips are not in countries of concern.”
Trackers were found in Dell and Super Micro shipments, which contained Nvidia and AMD chips.
The knowledge.
Bipartisan support for chip tracking has been building for some time. Earlier this year, Representative Bill Foster, alongside seven other lawmakers, introduced the Chip Security Act, while Senator Tom Cotton introduced a similar measure around that same time for the Senate. While neither passed Congress, both of these bills aimed to improve export documentation, increase chip flow transparency, and strengthen enforcement efforts to prevent smuggling.
These tracking initiatives and President Trump’s AI Action Plan come just after the administration repealed several major export controls. These controls, which were established under the former Biden administration, heavily restricted both how many chips could be exported and to whom domestic chip manufacturers could export their products.
These policy changes demonstrate that while the Trump administration still intends to oversee chip exports and control chip access, it prefers a different approach to keeping China away from the US’s most advanced capabilities. This approach aims to instead provide limited access to older chips, allowing companies to continue to grow and expand without exposing the nation's more powerful AI chips.
The impact.
This policy shift reflects the clear balancing effort that the Trump administration is aiming to create. One that allows more room for US chipmakers to access global markets while still ensuring powerful technologies remain within the nation. By moving away from export bans to chip tracking, the administration is signaling that it wants to encourage market expansion without harming national security.
For US companies, these changes could mean easier and more reliable access to overseas markets for growth opportunities, but could also bring about new compliance challenges and the possibility of government oversight over chip shipments. People should understand that these policies reflect a rapidly changing dynamic that needs to be managed to mitigate any unforeseen risks.
Highlighting key conversations.
In this week’s Caveat Podcast, our team held its monthly Policy Deep Dive, where we discussed how countries around the world are shifting their strategies when it comes to managing cyberspace. Whereas previously nations oftentimes strived to balance their offensive and defensive efforts with a stronger emphasis being placed on defense, this ideology is shifting. Now, nations are adopting a more offensive approach, aligning both their operational goals and funding support to reflect these changes.
Like what you read, and curious about the conversation? Head over to the Caveat Podcast for the full scoop and additional compelling insights. Our Caveat Podcast is a weekly show where we discuss topics related to surveillance, digital privacy, cybersecurity law, and policy. Got a question you'd like us to answer on our show? You can send your audio file to caveat@thecyberwire.com. Hope to hear from you.
Other noteworthy stories.
Australia sues Optus.
What: The Australian Information Commissioner (AIC) has sued Optus for violating the 1988 Privacy Act.
Why: On Friday, the AIC sued Singaporean-owned company, Optus, for breaching privacy laws related to a 2022 cyber attack. This attack compromised millions of customers’ data, and the AIC is suing for one breach for each of the 9.5 million people impacted. While the court can impose A$2.2 million per breach; however, it is unclear how much the watchdog is seeking.
Optus stated that it is reviewing the claims but has not yet assessed the potential financial impact from the breach.
Wikipedia loses UK court challenge.
What: Wikipedia lost its legal challenge against the UK’s online safety law.
Why: On Monday, London’s High Court ruled against Wikipedia’s legal challenge to parts of the nation’s Online Safety Act. The legal challenge was originally filed when the Wikipedia Foundation stated that the law could impose the strictest restrictions on the online platform.
Judge Jeremy Johnson dismissed the case, stating that the company could bring another challenge if Ofcom concluded that the company was a Category 1 service. Judge Johnson added that his decision “does not give Ofcom and the Secretary of State a green light to implement a regime that would significantly impede Wikipedia’s operations.”
The Wikipedia Foundation responded to the ruling, writing that it “does not provide the immediate legal protections for Wikipedia that we hoped for.”