America seeks to halt shipments of Nvidia chips to Chinese companies abroad
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May 31 (Reuters) - The U.S. Commerce Department on Sunday took action to close a potential loophole it created a year ago that may have prompted companies to export the world's most advanced chips, such as Nvidia's highly sophisticated Rubin and Blackwell processors and AMD's MI350X, to Chinese entities located outside of China.
The unexpected guidance suggests that the best American AI chips may have been being exported to Chinese AI subsidiaries in countries such as Malaysia for nearly a year, despite widespread U.S. efforts to deny Chinese companies the semiconductors needed to develop vital AI capabilities.
The new guidelines were published on the Commerce Department's website on Sunday.
It is unclear how many chips were exported during the year in which the administration of US President Donald Trump left the door open. A source in the chip industry with extensive knowledge of the supply chain stated that the number could reach hundreds of thousands.
In unusual guidance issued earlier this week, the Commerce Department said it would impose licensing requirements for advanced chips on entities headquartered in China, even if those entities are located outside of China.
The Commerce Department has not yet responded to a Reuters request for comment.
Nvidia and AMD have not yet responded to requests for comment.
The Commerce Department created this loophole when it announced in May 2025 that it would not enforce the AI proliferation rule issued in the final days of the Biden administration. That rule regulated global access to artificial intelligence chips.
“This is a huge problem,” said Chris McGuire, a technology expert and former State Department official, in a social media post on Sunday. He explained that the loophole allowed overseas subsidiaries of Chinese companies to purchase Nvidia Blackwell chips without a license.
He added, "Chinese companies are buying these chips, most likely in large quantities."
The new guidelines do not require data centers to stop using chips or to cut off service to advanced computing elements such as servers.