Nvidia’s CEO just got the green light to sell advanced AI chips to China—rewriting three years of tough US controls overnight. Why does it matter? Because “compute” is now the oil of the AI era—and America’s hold on it just got looser.
Key Takeaways
- Trump reverses export ban on Nvidia’s H20 chips to China.
- China gains legal access to vital AI hardware, easing smuggling routes.
- Rare earth deal hints at bigger geopolitical trade-offs ahead.
- Experts warn US is giving up strategic ground in AI chip supremacy.
Late Monday night, Nvidia’s CEO Jensen Huang, the ninth-richest person on the planet, broke news that’s already sending ripples through Silicon Valley, Washington—and Beijing. The Trump administration is walking back a cornerstone of America’s high-tech rivalry with China. After nearly three years of strict export controls, the US will now let Nvidia ship its H20 AI chips to Chinese buyers.
At first glance, it might sound like business as usual: Trump imposes a trade ban, then lifts it. But this about-face could reshape the AI power balance for years to come.
Why these chips matter
The H20 isn’t Nvidia’s most advanced chip—that title belongs to the coveted H100. But the H20 was cleverly designed to dance around US export rules. It’s weaker in some tasks, sure. Yet in others, it can even outperform the H100—and costs half as much. For Chinese AI giants like DeepSeek or Tencent, that’s a dream come true.
Until now, Washington’s export controls have made life difficult for China’s AI labs. Smuggling was the workaround. Earlier this year, Bloomberg uncovered a massive secret data center project in China’s Gobi Desert—requiring over 115,000 high-end Nvidia chips that, technically, shouldn’t have crossed the border. Now? With Trump’s sudden greenlight, they might not need smugglers at all.
A fresh loophole—wide open
Back in April, US regulators figured out Nvidia’s plan to push the H20. They shut it down, saying the chip needed a special license to reach Chinese hands. Huang’s late-night announcement means Trump is tossing that restriction aside. In exchange? Rare earth minerals. Critical elements like gallium and germanium—vital for all kinds of semiconductors—will flow to the US. But the cost is clear: China’s AI scene just got an express lane to better hardware.
Compute: The new oil
It might sound like tech jargon, but “compute” is the magic fuel behind modern AI. The more advanced chips you have, the faster you can build, train, and deploy AI models. Erich Grunewald, a policy researcher, puts it bluntly: “It’s a strategic resource, like oil or steel once were. There’s no limit—everyone wants more.”
And these chips are not easy to come by. They’re designed mostly by Nvidia, built by TSMC in Taiwan, and rely on machines from just one Dutch company, ASML. Production can’t just ramp up overnight. Building new chip plants takes years, not months.
This chokehold gives the US huge leverage—something the Biden administration tried to wield aggressively with tough export controls. Under Trump, that door is now swinging open.
The human factor
Huang, fresh off praising China’s “super-fast” AI innovation at a Beijing expo, framed it as global progress. He called China’s AI startups “catalysts for everyone,” positioning the company as an AI peacemaker. Some see it differently. To critics, Nvidia is playing both sides—talking up America’s tech edge while quietly powering up its biggest rival.
Smuggling still looms
Even with the H20 unlocked, smuggling isn’t going away. Reports of chips rerouted through Malaysia and Thailand, or quietly packed into secret shipments, continue to surface. The Bureau of Industry and Security has just 350 agents tasked with tracking trillions in tech trade. Their time is split between policing AI chips and enforcing sanctions against Russia and Iran. It’s not exactly a fair fight.
A bipartisan group in Congress wants tougher measures, like “location verification” for chips. Think of it as GPS for processors. If a chip built for Singapore suddenly pings from Shanghai, the US would know. It wouldn’t stop smuggling outright, but it would flag bad actors before the next shipment leaves port.
China’s next move
Beijing isn’t sitting idle. President Xi Jinping has doubled down on building China’s own chip supply chain. Companies like Huawei are racing to break Nvidia’s monopoly—but they’re not there yet. For now, legal access to Nvidia’s hardware remains China’s golden ticket to staying in the AI race.
China is also positioning itself as irreplaceable in global supply chains. The Beijing supply chain expo drew over 650 companies from 60 countries—a flex that says, try replacing us. And with the rare earth trade-off baked in, Trump’s latest twist only strengthens that hand.
Conclusion
This isn’t just another flip-flop on tariffs. By bending on chips, the US is relaxing its grip on something far more critical than soybeans or steel: the fuel that powers tomorrow’s AI breakthroughs. If China’s AI labs narrow the gap in the next few years, historians may point back to this week—and Trump’s handshake with Huang—as the moment the chip war changed course.