The New York Times//America Will Come to Regret Selling A.I. Chips to China

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BY BEN BUCHANAN

The Trump administration announced last week that it would allow China to purchase advanced artificial intelligence chips from the tech giant Nvidia. The decision, a reversal of the administration’s past restriction on chip sales, is a profound mistake.

It cedes the United States’ greatest point of leverage in A.I.: control of the global computing power supply chain. Mr. Trump claims to champion American tech, releasing an “A.I. action plan” this week. But permitting these chip sales threatens American dominance in A.I., undermines U.S. tech companies and risks our national security — all in favor of one chipmaker’s near-term profits.

Computer chips are the lifeblood of powerful A.I. systems. A.I. companies compete desperately to buy this hardware; many spend the vast majority of their funding on chips. (I do advisory work for some of these companies, including Anthropic.) American chipmakers, including Nvidia, sell more than 10 million of these chips annually. China relies on these chips to aid both its military and its A.I. companies, but can make only about 200,000 of its own per year, the Trump administration said last month.

In other words, Nvidia’s chips will give China’s A.I. ecosystem, and its government, just what it needs to surpass the United States in the most critical arenas. A.I. technology could soon transform military operations, potentially enabling better hacking and sophisticated drone warfare. Ample evidence suggests that Chinese military suppliers prefer Nvidia chips and use A.I. systems trained on U.S. chips. The stakes are not hard to grasp: We should not allow American troops and intelligence officers to be targeted by Chinese A.I. trained on Nvidia chips.

The first Trump administration understood these risks. Mr. Trump placed export controls on some chip-making equipment in order to hobble China’s A.I. chip industry, while the Biden administration — in which I served as the White House special adviser on A.I. — went further, restricting the sale of additional equipment and of Nvidia’s flagship chip, called the H100. Both administrations accused China of using advanced A.I. to modernize its military and to commit human rights abuses.

Last year, in response to these restrictions, Nvidia created a chip called the H20, which is designed to elude U.S. export controls so it can be sold in China. The controls focused on processing power, so Nvidia gave the H20 chip mediocre processing but large amounts of high-bandwidth memory. That memory allows the H20 to outperform the H100 when running, as opposed to training, A.I. systems — a process called inference. Inference is becoming increasingly important: One analysis suggests that it will make up more than 70 percent of A.I. needs by 2026. This memory, and other components of the H20, could have been used to make H100 chips for American companies.

Before reversing itself, the Trump administration rightly blocked H20 sales to China in April. A White House official said that there was “bipartisan and broad concern” about how China would use the chips.

The controls appeared to be working. DeepSeek, China’s most impressive A.I. company, reportedly failed to follow through on a previous breakthrough because it was cut off from the H20. This weakness was no surprise: DeepSeek’s chief executive had repeatedly admitted that restrictions on the export of U.S. chips were the greatest impediment to his company’s future.

But Nvidia’s chief executive, Jensen Huang, lobbied hard for a reversal. To do so, he hyped China’s Huawei chips, claiming they were on par with Nvidia’s and that Huawei could produce them in competitive quantities. He urged the Trump administration to let Nvidia re-enter the Chinese market to stop Huawei from growing more powerful. China’s state media trumpeted Mr. Huang’s comments, as did Trump administration officials in justifying their reversal.

But the claim that China’s chips rival the United States’ is false. Huawei simply has not shown that it can significantly increase A.I. chip manufacturing. Despite Chinese investments of hundreds of billions of dollars in chip manufacturing since 2014, U.S. export controls on chip-making equipment have held back Huawei’s production capacity. The estimated number of chips Huawei can manufacture this year would hardly be enough to fill a single cutting-edge data center.

Each of those Huawei chips also performs worse than advanced U.S. chips. Huawei chips account for only about 3 percent of global supercomputing power. If Huawei’s chips were as good as Nvidia’s, there wouldn’t be the overwhelming demand in China for the H20.

The H20 is a very capable chip. It performs substantially better than Huawei’s best chip at inference. Opening the floodgates for H20s to flow into China will revitalize Chinese companies like DeepSeek as they try to supplant U.S. firms in the global market. Some other chipmakers may wonder why Nvidia gets to profit while their wares are subject to U.S. export controls.

Worst of all, the H20 decision could fracture the hard-won bipartisan consensus on the need for American A.I. dominance over China. Mr. Trump’s decision has drawn bipartisan opposition, but the A.I. industry senses weakness in his China policy. Mr. Huang, who visited China to laud its A.I. companies just after he lobbied Mr. Trump, told a Chinese audience, “I hope to get more advanced chips into China than the H20.”

As the world’s first $4 trillion company, Nvidia doesn’t need the Chinese market to thrive. The demand for A.I. chips from U.S. companies is enormous: Firms are poised to spend hundreds of billions of dollars in 2025 alone on A.I. technology and data centers. Amid the A.I. boom, Nvidia’s stock price has increased by a factor of 10 over the last two and a half years, even as U.S. chip restrictions tightened.

You’d be forgiven for assuming that the United States got something from China in exchange for giving away its advanced technology. Not from what I can tell. The day after the H20 reversal, China ratcheted up its own export controls on critical minerals and battery technologies — areas where it has an advantage. It was a fitting and lamentable coda to a decision that benefited one company at the expense of America’s A.I. leadership and its national security.

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