News that Nvidia Corp would not be able to sell its customized artificial intelligence chips in China caught the company and markets by surprise.
The disclosure came just a day after Nvidia announced a half-trillion-dollar US investment commitment that was celebrated by US President Donald Trump, and followed a media report saying that Nvidia CEO Jensen Huang (黃仁勳) had struck a deal safeguarding the H20 chips in China over dinner at Mar-a-Lago.
The confusion represented what is now a usual day in Washington, as Trump plays out his chaotic trade games and increases pressure on China to negotiate. Meanwhile, Beijing has signaled that one of its chief concerns heading into potential talks are US policies designed to suppress its modernization.
The scene is now set for Nvidia’s H20 chips, made specifically to comply with export controls, to be turned into the ultimate tariff-related bargaining point. An exemption would please the company, which has long argued that export controls are ineffective and give a boost to domestic players including Huawei Technologies Co, and while Beijing is not backing down, access to artificial intelligence (AI) chips is one thing it desperately wants.
We have seen Trump blur the lines over tech national security concerns in the past. The various export controls on Nvidia predated his tariff blitz and are meant to hold China back in the AI race over fears that Beijing’s edge could give it military or economic advantages. However, the president has ignored similar worries before: He extended a deadline for TikTok to be banned in the US, turning the China-owned social media platform into a key leverage on tariffs.
The White House might yet roll back the crackdown on AI chips in China. Regardless, it is a timely reminder that this trade war is risking the US’ hard-won gains in the race for tech supremacy. Washington cannot fight on two fronts.
Access to chips and computing power has been at the core of Silicon Valley’s lead over China in AI, but that gap is closing fast. Washington’s tightening chip restrictions have been porous, but they have no doubt bought time.
One thing we have learned is that they are ineffective without international cooperation. The US had to convince the Netherlands and Japan, key allies who oversee parts of the semiconductor supply chain, to get on board for these policies to have a fighting chance at holding Beijing back. However, Trump’s “America First” rhetoric and tariff antagonism does not provide much incentive for joint action anymore.
DeepSeek, the Hangzhou-based AI start-up that surprised the world earlier this year, shows that China is not as far behind on AI software development as many in the West thought. The US’ key lead now remains in hardware, and namely advanced chips. However, the likes of Huawei and Semiconductor Manufacturing International Corp are working around the clock to produce domestic alternatives to Nvidia’s AI processors. Some analysis suggest that these local players are just a couple of years away from creating viable homegrown Nvidia alternatives to power China’s AI boom (while still having dramatically lower performance than Nvidia’s top-of-the-line offerings). This means that the window for how long these export controls can still have any impact is closing fast.
Perhaps the biggest indication that these chip restrictions have slowed China’s AI ambitions, even if they have not stopped it, has come from DeepSeek founder Liang Wenfeng (梁文鋒). In a rare interview, he said that the biggest barrier for his company is not money, but access to high-end chips. And these H20s are still in high demand: Chinese tech giants, including ByteDance Ltd, Alibaba Group Holding Ltd and Tencent Holdings Ltd, have reportedly stockpiled orders in the first three months of this year in preparation for the long-rumored crackdown.
Much of the recent coverage of the latest Nvidia curbs frame it as more evidence that multi-billion-dollar dealmaking with Trump offers no guarantees of tariff reprieve. However, the reality is the chip war predated this trade war, and blurring the lines risks losing both.
Nvidia’s AI chips should not have been turned into pawns. However, they are increasingly looking like the biggest concession Trump now has to get himself out of the chaos he has unleashed.
Catherine Thorbecke is a Bloomberg Opinion columnist covering Asia tech. Previously she was a tech reporter at CNN and ABC News.
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