China Approves Nvidia H200 Chip Sales Despite Security Concerns
The Trump administration on Tuesday formally approved sales of Nvidia’s second-most powerful AI chips to China, establishing a rule that is expected to initiate shipments of the H200, despite significant apprehensions among China hawks in Washington. As per the regulations, a third-party testing lab will conduct a review of the chips to verify their technical AI capabilities prior to shipment to China, which is restricted to receiving no more than 50% of the total quantity of chips sold to American customers. Nvidia must ensure that there is an adequate supply of H200s in the U.S., while Chinese customers are required to show “sufficient security procedures” and are prohibited from utilizing the chips for military applications. The conditions had not been established previously.
In a statement, Nvidia remarked that the action taken by U.S. President Donald Trump “strikes a thoughtful balance that is great for America” and will assist the company in competing within the global chip market. The administration’s critics are inadvertently advancing the interests of foreign competitors on U.S. entity lists – America should consistently strive for its industry to compete for vetted and approved commercial business, thereby supporting genuine jobs for real Americans,” Nvidia stated. “China has consistently advocated that China and the United States achieve mutual benefit and win-win results through cooperation,” Liu Pengyu said in a statement. “We oppose blocking and restricting China, which disrupts the stability of industrial and supply chains.” Last month, Trump announced that he would permit the chip sales in return for a 25% fee for the U.S. government. The decision faced criticism from China hawks throughout the U.S. political landscape, who expressed concerns that the chips would enhance Beijing’s military capabilities and diminish the U.S. edge in artificial intelligence.
Jay Goldberg remarked that the caps on exports seemed to represent a compromise that imposed certain limitations on Nvidia’s sales in China, yet could prove challenging to enforce. “As we have seen, (Chinese) companies have found ways to get access to those chips, and the U.S. government appears highly transactional in their approach to chip exports,” Goldberg said. In other terms, this appears to be a Band-Aid, a short-term effort to address the significant void within the U.S. government export policy makers. According to a report last month, Chinese technology companies have ordered over 2 million H200 chips, each priced at approximately $27,000, surpassing Nvidia’s available inventory of 700,000 chips. During the Consumer Electronics Show last week in Las Vegas, Nvidia CEO Jensen Huang announced that the company is increasing production of H200 chips due to robust demand from China and globally, which is pushing up the rental prices for the H200 chips currently housed in cloud computing data centers. Saif Khan stated that the rule would significantly enhance China’s AI capabilities. “The rule would allow about 2 million advanced AI chips like the H200 to China, an amount equal to the compute owned today by a typical U.S. frontier AI company,” Khan said.
“The administration will also face challenges enforcing the rule’s know-your-customer requirements that restrict Chinese cloud providers from supporting nefarious uses.” Such concerns had prompted the Biden administration to bar sales of advanced AI chips to China. However, the Trump administration, under the guidance of White House AI czar David Sacks, contends that exporting advanced AI chips to China deters Chinese rivals—like the heavily sanctioned Huawei—from intensifying their attempts to match the cutting-edge chip designs of Nvidia and AMD. When Trump announced the sales last month, he stated they would be exported to China “under conditions that allow for continued strong National Security.” However, inquiries have emerged regarding the administration’s potential to impose any restrictions on chip shipments, as well as whether Beijing would permit their domestic sales. Last month, it is reported that the U.S. had initiated a review that could lead to the first shipments of the chips to China.
