US closes loophole that let advanced AI chips reach Chinese firms overseas for a year

US takes step to halt Nvidia AI chip shipments to Chinese firms outside China

May 31 (Reuters) - The U.S. Department of Commerce on Sunday moved to close a year-old potential loophole it had created that may have led companies to export the world's most advanced chips - like Nvidia's (NVDA.O), opens new tab most sophisticated Rubin and Blackwell processors, as well as AMD's (AMD.O), opens new tab MI350x - to Chinese entities located outside China. The unexpected guidance suggests the United States' best AI chips may have been making their way ⁠to the subsidiaries of Chinese AI firms based in places like Malaysia for almost a year 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 on Sunday. It is unclear how many of the chips have been exported in the year that the Trump administration left the door open. One chip industry source with deep supply-chain knowledge estimated it was in the hundreds of thousands. In unusual weekend guidance, the Commerce Department said it would enforce license requirements for advanced chips to entities headquartered ⁠in China, even when the entities were located 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 Commerce Department created the opening when it announced in May 2025 that it would not be enforcing the AI Diffusion rule issued in the ⁠last days of the Biden administration. The rule governed global access to AI chips. Chris McGuire, a technology expert and former State Department official, said in a social media post on Sunday: "This is a HUGE problem." He ⁠said the loophole allowed the overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license. "Chinese companies have been buying these chips, very likely at scale," McGuire said. In another twist, ⁠the new guidance does not require data centers to stop using the chips or cut off servicing of the advanced computing items such as servers. Reporting by Karen Freifeld in New York; Additional reporting by Fanny Potkin in Singapore; Editing by Chris Sanders and Matthew Lewis Our Standards: The Thomson Reuters Trust Principles., opens new tab

U.S. takes step to halt Nvidia AI chip shipments to Chinese firms outside China

The U.S. Department of Commerce on Sunday moved to close a year-old potential loophole it had created that may have led companies to export the world's most advanced chips -- like Nvidia's most sophisticated Rubin and Blackwell processors, as well as AMD's MI350x -- to Chinese entities located outside China. The unexpected guidance suggests that the United States' best AI chips may have been making their way to the subsidiaries of Chinese AI firms based in places like Malaysia for almost a year, despite broader U.S. efforts to starve Chinese firms of the semiconductors needed to develop critical AI capabilities. The new guidance was posted on the Commerce Department's website on Sunday. It is unclear how many of the chips have been exported in the year that the Trump administration left the door open. One chip industry source with deep supply-chain knowledge estimated it was in the hundreds of thousands. In unusual weekend guidance, the Commerce Department said it would enforce license requirements for advanced chips to entities headquartered in China, even when the entities were located 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 Commerce Department created the opening when it announced in May 2025 that it would not be enforcing the AI Diffusion rule issued in the last days of the Biden administration. The rule governed global access to AI chips. Chris McGuire, a technology expert and former State Department official, said in a social media post on Sunday: "This is a HUGE problem." He said the loophole allowed the overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license. "Chinese companies have been buying these chips, very likely at scale," McGuire said. In another twist, the new guidance does not require data centers to stop using the chips or to cut off service to advanced computing equipment such as servers.

US Closes Loophole That Allowed Nvidia, AMD AI Chip Shipments To Chinese Firms Overseas - NVIDIA (NASDAQ:

What Does The Guidance Say? The Commerce Department's new guidance, published on its website, indicates that subsidiaries of Chinese AI firms in countries such as Malaysia have been receiving these advanced chips for almost a year. This development comes despite ongoing U.S. measures to limit China's access to semiconductors vital for AI advancements. The department now intends to impose license requirements for advanced chips on entities headquartered in China, regardless of their location. The loophole emerged when the Commerce Department opted not to enforce the AI Diffusion rule in May 2025, a decision made during the final days of the Biden administration. Expert Explains Significance Of New Guidance Council on Foreign Relations' Senior Fellow for China, Chris McGuire, pointed out in a post on X that this oversight enabled Chinese companies to acquire Nvidia Blackwell chips without a license. However, the new guidance does not mandate data centers to cease using these chips or servicing related computing equipment. "This clarification does make clear that Blackwell shipments to China-headquartered companies outside of China are now illegal again -- which is good, although obviously we have to see how many shipments have already gone to assess how much damage was done," he said. Huang Emphasizes China's Significance As A Market The U.S. government's decision to close this loophole is part of a broader strategy to curb China's access to advanced technology. Nvidia CEO Jensen Huang recently emphasized China's significance as a market, underscoring the complex dynamics at play. Despite export controls, Nvidia's operations in China have remained substantial, with reports suggesting that over 20% of its fiscal year 2026 compute revenue was still derived from China through intermediaries. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.