US takes step to halt Nvidia AI chip shipments to Chinese firms outside China
By Karen Freifeld
May 31 (Reuters) – The U.S. Commerce Department moved on Sunday to close a potential one-year gap that could lead companies to export the world’s most advanced chips. Nvidia‘s most advanced Rubin and Blackwell processors, as well as AMD’s MI350x, are distributed to Chinese organizations outside of China.
The unexpected guidance shows that top U.S. AI chips have been making their way to subsidiaries of Chinese AI firms based in places like Malaysia for nearly a year, despite broader U.S. efforts to starve Chinese firms of semiconductors needed to develop critical AI capabilities.
The new guidance was published on the Ministry of Commerce’s website on Sunday.
It’s unclear how many chips were exported in the year the Trump administration left the door open. A chip industry source with deep knowledge of the supply chain estimates that number in the hundreds of thousands.
In unusual guidance over the weekend, the Commerce Department said it would apply licensing requirements for advanced chips to entities headquartered in China, even if those entities are outside China.
The Commerce Department did not immediately respond to a request for comment.
Nvidia and AMD did not immediately respond to requests for comment.
The Department of Commerce created this gap by announcing in May 2025 that it would not implement the Artificial Intelligence Diffusion rule published in the last days of the Biden administration. This rule governed global access to AI chips.
“This is a BIG problem,” tech expert and former State Department official Chris McGuire said in a social media post on Sunday. This loophole allows overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license, the official said.
“Chinese companies are likely purchasing these chips on a large scale,” McGuire said.
In another change, the new guidance does not require data centers to stop using chips or cut off service to advanced computing elements such as servers.
(Reporting by Karen Freifeld in New York; Additional reporting by Fanny Potkin in Singapore; Editing by Chris Sanders and Matthew Lewis)
