Trump warned by top Senate Democrats to rethink advanced AI chip sales to China

Six Senate Democrats on Friday released an open letter asking President Donald Trump to reconsider his decision to allow tech giants Nvidia and Advanced Micro Devices to sell AI semiconductor chips to China in exchange for 15% of revenue from the sales.

The letter — signed by Senators Chuck Schumer, D-N.Y.; Mark Warner, D-Va.; Jack Reed, D-R.I.; Jeanne Shaheen, D-N.H.; Christopher Coons, D-Del.; and Elizabeth Warren, D-Mass. — was in response to an Aug. 11 announcement by Trump that Nvidia and AMD would pay the U.S. government a 15% cut of revenue from chip sales to China in exchange for export licenses.

"Our national security and military readiness relies upon American innovators inventing and producing the best technology in the world, and in maintaining that qualitative advantage in sensitive domains. The United States has historically been successful in maintaining and building that advantage because of, in part, our ability to deny adversaries access to those technologies," the letter states.

"The willingness displayed in this arrangement to 'negotiate' away America's competitive edge that is key to our national security in exchange for what is, in effect, a commission on a sale of AI-enabling technology to our main global competitor, is cause for serious alarm," the letter continues.

Senators also warned that selling advanced AI chips — specifically Nvidia's H20 and AMD's MI308 chips — to China could help strengthen its military systems, a claim that Nvidia denies.

In a statement to CNBC, a Nvidia spokesperson said: "The H20 would not enhance anyone's military capabilities, but would have helped America attract the support of developers worldwide and win the AI race. Banning the H20 cost American taxpayers billions of dollars, without any benefit."

The letter from Senate Democrats also requests a detailed response from the administration by Friday, Aug. 22, regarding the current deal involving Nvidia and AMD, as well as any similar arrangements being made with other companies.

"We again urge your administration to quickly reverse course and abandon this reckless plan to trade away U.S. technology leadership," the letter states.

A request for comment from the White House and AMD was not immediately returned.

Despite Trump allowing chip sales to resume, it has already become clear that China isn't welcoming Nvidia back with open arms, instead urging tech companies to avoid buying U.S. companies' chips, according to a Bloomberg report.

"We're hearing that this is a hard mandate, and that [authorities are actually] stopping additional orders of H20s for some companies," Qingyuan Lin, a senior analyst covering China semiconductors at Bernstein, told CNBC.

In a separate report, The Information said regulators in China have ordered major tech companies, including ByteDance, Alibaba, and Tencent, to suspend Nvidia chip purchases until a national security review is complete.

— CNBC's Kristina Partsinevelos contributed to this report