_WHAT’S HAPPENING_
Artificial intelligence (AI) is today’s space race, and for good reason—it’s tied directly to military superiority. With that in mind, America and its domestic industry have strived to maintain global supremacy against its fiercest competitor.
China has been closing the gap over the past few years through incredibly fast-paced growth in its domestic chip production, which is needed to improve AI capabilities. Still, with chipmakers like Nvidia, America is years ahead.
In its latest move, the Trump administration will allow China to purchase Nvidia’s outdated but still advanced H200 chips, aimed at both handicapping China’s domestic AI industry and boosting the United States' revenue.
_THE FACTS_
The Trump administration will now allow China to purchase Nvidia’s H200 chips.
The United States government will receive a 25 percent cut of the sales, with billions in revenue expected.
China was blocked from purchasing these chips under export controls from the Biden administration.
China will still be blocked from acquiring Nvidia’s more powerful chips that America has access to.
China will likely be able to recreate its own version of the H200 chip by 2027.
China’s domestic suppliers take up 60 percent of China’s market share. Its core strategy is to increase domestic production and market share at home and abroad.
Trump’s strategy aims to get China to buy American chips, taking market share away from Chinese producers and hindering their domestic production growth.
Some are skeptical that China would even accept American chips because of the risk to its own military goals with the domestic AI industry.
There have been many illegal attempts, some reportedly successful, to smuggle these and more advanced chips into China despite export controls.
Press Secretary Karoline Leavitt said, “Nvidia will only be shipping H200 products to approved customers in China, under conditions that will allow for continued strong national security.”
_INSIGHTS_
China’s push for AI dominance has become an inward-looking project, centered on building and adopting its own chips. The Trump administration argues that US export controls backfired: blocking China’s access to Nvidia chips did not halt progress but instead accelerated domestic innovation, since China can and will replicate the technology in just a few years.
By resuming limited exports, the administration argues the United States could regain market share while dulling the financial incentives driving China’s chip industry; access to American chips reduces demand for Chinese chips, weakening the growth of China’s domestic chip industry. Nvidia’s chief executive, Jensen Huang, has long argued this point. Export controls, in this view, have not stopped China’s rise in AI but instead have sped it up.
