US to halt Nvidia AI chip sales to Chinese firms
The U.S. Commerce Department has moved to close a potential loophole that could lead companies to export the world’s most advanced chips, such as Nvidia’s most advanced Blackwell processors, to subsidiaries of Chinese companies outside of China.
The unexpected guidance suggests that top U.S. AI chips are making their way to subsidiaries of Chinese AI firms based in places like Malaysia, despite broader U.S. efforts to starve Chinese firms of semiconductors needed to develop critical AI capabilities.
The new guidance was posted on the Commerce Department’s website Sunday, following an article about the loophole that circulated in Washington, according to people familiar with the matter.
“The floodgates have quietly opened,” reads the paper, a copy of which was seen by Reuters, but does not list any writers in Friday’s paper.
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 weekend guidance, the ministry’s Bureau of Industry and Security (BIS) said it would impose licensing requirements for advanced chips on organizations based outside China that are based in China.
“BIS has published guidance clarifying the export license requirements in force from 2023,” a bureau spokesman said.
“BIS will continue to rigorously enforce export controls to protect critical American technology.”
The new guidance doesn’t change anything for Nvidia, a company official said, adding that it couldn’t ship the chips because the Commerce Department had explicitly imposed a licensing requirement on Nvidia in a letter.
AMD, another major manufacturer of the sought-after AI chips, did not immediately respond to a request 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. The rule had licensing requirements governing global access to AI chips.
Former State Department official Chris McGuire, an expert on technology and national security, said in a social media post on Sunday that the loophole allowed overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license.
“This is a huge problem,” he said.
“Chinese companies are likely purchasing these chips on a large scale,” McGuire said.
McGuire said the guidance closes the gap but leaves another gap.
This loophole prevents Taiwan-based TSMC and other foundries from having to do extra due diligence to ensure the high-end AI chips they produce are not intended for Chinese shell companies.
He said the problem was not solved by regulation.
A TSMC spokesperson declined to comment.
The new guidance also does not require data centers to stop using chips or cut off service to advanced computing elements such as servers.
