Selling US-made AI chips to China sacrifices America’s global standing
In what Bloomberg termed “a dramatic reversal,” the Trump administration will grant licenses to Nvidia Corp. so that it can sell its H20 chips to Chinese parties. In April, Trump officials had prohibited the sale of H20s to that country.
At the same time, Advanced Micro Devices announced plans to resume sales of its MI308 artificial intelligence chip to China.
The sale of advanced microchips to China is a mistake, almost certainly a grave one, but it is a mistake that the industry is determined to make. Not satisfied with exporting just the H20, Nvidia Chief Executive Jensen Huang said at a press conference in Beijing this month that he wanted to sell even more advanced chips.
“The reason for that is because technology is always moving on,” he explained. “It’s not like wood.”
“Today, [the NVIDIA Hopper GPU architecture] is terrific, but some years from now we will have more and more and better and better technology, and I think it’s sensible that whatever we’re allowed to sell in China will continue to get better and better over time as well,” Huang said.
Nvidia said it will develop for export to China a new chip based on its Blackwell design. The chip will allow users to integrate AI into manufacturing.
Commerce Secretary Howard Lutnick justified the reversal of the export ban by pointing out that the H20 was only Nvidia’s “fourth best” chip.
“We don’t sell them our best stuff — not our second-best stuff, not even our third-best,” he told CNBC on the 15th. “You want to sell the Chinese enough that their developers get addicted to the American technology stack.”
“The idea is the Chinese are more than capable of building their own,” the Commerce secretary said. “You want to keep one step ahead of what they can build, so they keep buying our chips.”
The problem with this thinking is that it is based on the false premise that China does not at its core need American chips, so there’s no harm in selling them to prolong Chinese dependence.
“Despite Beijing pouring significant subsidies into its domestic semiconductor industry, China cannot produce chips capable of training leading AI models, leaving Chinese firms reliant on American suppliers,” wrote Jack Burnham and Miles Kershner of the Foundation for Defense of Democracies after the H20 announcement.
“This reliance has led to significant computing shortages. Even DeepSeek, a leading Chinese AI developer, has publicly stated that its models’ power remains constrained due to American export controls on advanced AI chips.”
So will China be able to develop comparable chips to America’s best?
“China’s Communist Party has always been known for lying, and we need look no further than its tech leviathan Loongson Technology,” Blaine Holt, a retired U.S. Air Force general and now China commentator, told me this month.
“Loongson, we were told, was ‘better than Intel’ and powered everything electronic in China. The discovery that their flagship chip, the 3C6000, was barely on par with Intel chips from 13 generations ago has consequences for users, especially the People’s Liberation Army.”
Huang assures Americans that China will not use the H20 for its military. “We don’t have to worry about it,” he told CNN’s Fareed Zakaria earlier this month.
Despite what Huang says, we must worry. According to Burnham and Kershner, giving China the H20 “will allow it to rapidly integrate AI into its military while it continues to pursue self-sufficiency.”
The H20, significantly more powerful than Nvidia’s export-compliant H100 line, will be “essential for AI deployment due to its memory capabilities,” the Foundation for Defense of Democracies scholars point out.
“The Trump administration,” they note, “is giving China a much-needed boost in the race for artificial intelligence.”
And that boost comes at a crucial time for AI development.
“The No. 1 factor that will define whether the U.S. or China wins this race is whose technology is most broadly adopted in the rest of the world,” said Brad Smith, Microsoft’s president, in congressional testimony. “Whoever gets there first will be difficult to supplant.”
“According to Jensen Huang, China is going to defeat the United States in the push for AI supremacy,” Brandon Weichert, senior national security editor of The National Interest, told me.
Weichert said since the Trump administration’s first attempt at slowing the sale of high-end chips to China “Beijing’s AI development has been slower than that of America’s because they lacked direct and easy access to those high-end chips. Authorizing Huang’s Nvidia to sell these chips to China will ensure that China does, in fact, outpace the Americans.”
So why would Trump allow the sale of the H20 to China? Many suspect the permission was part of a deal: China resumes sales of rare earths to the U.S. and America removes chip restrictions. Lutnick confirmed the outlines of this arrangement.
China certainly got the better of the bargain. America can source rare earths elsewhere or even buy them surreptitiously from Chinese parties — these minerals are actually so rare — but China must buy American chips, from Nvidia, AMD, or some other U.S. company.
It is true that, up to now, Chinese parties have been able to buy Nvidia chips through black market channels, but now they will be able to get more chips at cheaper prices and at a faster pace because they will be buying from Nvidia directly. Speed, as Smith noted, is critical in the race to develop artificial intelligence.
Beijing has been touting its technological supremacy, and nothing would undercut its grand claims more than if its AI development visibly stalled because the Chinese could not get microchips from American companies. Xi Jinping in June said that high tech is a main area of global competition.
“The Commerce Department made the right call in banning the H20,” Rep. John Moolenaar, the Michigan Republican who chairs the House Select Committee on the Chinese Communist Party, posted on X last week.
“Now it must hold the line. We can’t let the Chinese communists use American chips to train AI models that will power its military, censor its people and undercut American innovation.”
Gordon G. Chang is the author of “Plan Red: China’s Project to Destroy America” and “The Coming Collapse of China.”