The United States has lifted export restrictions on specific AI chips.

This allows Nvidia and Advanced Micro Devices (AMD) to sell to China.

It permits the sale of Nvidia’s H20 and AMD’s MI308 chips under certain conditions.

White House AI adviser David Sacks said the move aims to boost US competitiveness while limiting Huawei’s market share in China.

The policy change benefits Nvidia and AMD, which faced multi-billion-dollar losses due to previous export bans.

Treasury Secretary Scott Bessent said the policy shift is part of wider US-China trade talks, including rare-earth mineral negotiations.

Some critics raised security concerns, but officials argue the affected chips are outdated and pose minimal risk.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Export controls created market opportunities for Chinese competitors

Previous U.S. restrictions on AI chips backfired by accelerating China’s domestic semiconductor capabilities rather than containing them.

When Nvidia’s advanced chips were banned from the Chinese market, local firms like Huawei rapidly developed alternatives, with Huawei’s Ascend 910 series emerging as a direct competitor to Nvidia’s offerings 1.

This dynamic is reflected in Cambricon Technologies’ stock surge of over 400% in the past year as investors recognized the market opportunity created by export restrictions 1.

The unintended consequence of U.S. policy is evident in how Chinese firms exploited regulatory gaps, with some companies establishing entities in nearby countries to circumvent restrictions and obtain Nvidia chips through indirect channels 2.

Even under tight controls, black market activity flourished, with restricted A100 chips selling in China at double their U.S. price, demonstrating the difficulty of effectively blocking technology transfer through export controls alone 2.

2️⃣ Semiconductor restrictions expose the economic costs of tech decoupling

Export controls on chips have resulted in measurable financial harm to U.S. companies, with Nvidia previously announcing a $4.5 billion writedown on H20 chip inventory and warning of an additional potential $8 billion in lost sales 3.

The Federal Reserve Bank of New York found a statistically significant drop in revenue for firms impacted by export controls, confirming that trade restrictions create substantial economic trade-offs 3.

These costs are particularly significant in semiconductors due to the industry’s reliance on economies of scale, where reduced sales volumes can undermine competitiveness by increasing per-unit costs and limiting R&D investment 3.

The economic stakes extend beyond individual companies to national technological leadership, as the CHIPS and Science Act’s $52 billion investment could be undermined if U.S. firms cannot maintain global market share and sufficient revenue to fund innovation 3.

3️⃣ The evolving strategy reveals a shift from containment to competitive coexistence

The policy reversal demonstrates a strategic pivot from attempting to deny China access to AI technology entirely to allowing controlled access that maintains U.S. market leadership.

This approach acknowledges market realities where even with restrictions, Nvidia was projected to generate $12 billion in revenue from H20 sales in China in 2024, significantly outpacing Huawei’s competitive offerings 2.

The U.S. semiconductor controls have evolved through multiple phases since their implementation six years ago, gradually becoming more explicitly focused on AI while balancing security concerns with economic interests 4.

This balanced approach recognizes that despite hardware limitations imposed by export controls, Chinese firms have still developed competitive AI models, suggesting that complete technological decoupling may be neither achievable nor desirable 4.

The policy shift acknowledges the complex reality that U.S. and Chinese economies remain deeply intertwined, with both countries accounting for a significant portion of global GDP and manufacturing output despite ongoing tensions 5.

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