The United States Department of Commerce closed a legal loophole that allowed the export of advanced artificial intelligence chips from companies such as Nvidia Corp.(NASDAQ:NVDA) et Advanced Micro Devices Inc.(NASDAQ:AMD) to Chinese companies operating outside China.
What do the guidelines say?
The Commerce Department’s new directive, posted on its website, indicates that subsidiaries of Chinese artificial intelligence companies in countries such as Malaysia have been receiving these advanced chips for almost a year.
This development comes despite ongoing steps by the United States to limit China’s access to semiconductors critical to advances in artificial intelligence. The department now intends to impose licensing 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 importance of new directive
Chris McGuire, senior China fellow at the Council on Foreign Relations, noted in a post on X that this negligence had allowed Chinese companies to acquire Nvidia Blackwell chips without a license. However, the new directive does not require data centers to stop using these chips or equipping them with related computing hardware.
“This clarification makes it clear that Blackwell’s deliveries to companies domiciled in China but based abroad are illegal again, which is a good thing, although obviously we need to see the number of deliveries already made to assess the damage caused…, he declared.
Huang highlights importance of China as a market
The US government’s decision to close this loophole is part of a broader strategy to curb China’s access to cutting-edge technologies. The CEO of Nvidia, Jensen Huangrecently highlighted the importance of China as a market, highlighting the complexity of the dynamics at play.
Despite the export controls, Nvidia’s operations in China remained significant, with reports suggesting that more than 20% of its FY2026 IT revenue was still derived from China through intermediaries.
Huang recognized the strength of Huawei and admitted that Nvidia had largely reduced its presence in the Chinese AI chip market. This latest move from the United States could have further impact on Nvidia’s strategy and revenue streams, as the company attempts to overcome challenges posed by geopolitical tensions and regulatory changes.
Warning : This content was partially produced using AI tools and was reviewed and published by Benzinga editors.
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