The US Commerce Department issued weekend guidance to enforce license requirements for advanced AI chips destined for Chinese-headquartered entities, even if located outside China, closing a year-old loophole that may have allowed hundreds of thousands of Nvidia and AMD chips to reach Chinese AI firms via overseas subsidiaries.
WASHINGTON: The US Commerce Department has moved to close a potential loophole that may have allowed the export of the world's most advanced artificial intelligence chips to Chinese entities, even when those entities were located outside mainland China.
The unexpected weekend guidance aims to curb the flow of sophisticated semiconductors like Nvidia's Rubin and Blackwell processors and AMD's MI350x to subsidiaries of Chinese AI firms based in countries such as Malaysia. This loophole, created approximately one year ago, may have permitted these exports despite broader US efforts to limit Chinese access to chips critical for developing advanced AI capabilities.
It remains unclear precisely how many of these chips were exported during the period the loophole was open, though one industry source with deep supply-chain knowledge estimated the figure could be in the hundreds of thousands. The new directive clarifies that license requirements will be enforced for advanced chips destined for entities headquartered in China, irrespective of their physical location. The Commerce Department did not immediately provide comment, and Nvidia and AMD also did not respond to requests for comment.
The opening emerged when the department announced in May 2025 that it would not enforce the AI Diffusion rule, a regulation issued in the final days of the Biden administration that governed global access to AI chips. Technology expert and former State Department official Chris McGuire described the situation as a huge problem on social media, noting that the loophole allowed overseas subsidiaries of Chinese companies to purchase Nvidia Blackwell chips without a license and that purchases likely occurred at scale.
Notably, the new guidance does not mandate that data centers cease using these chips or discontinue servicing advanced computing equipment such as servers containing them
US Export Controls AI Chips Nvidia Blackwell AMD Mi350x China Subsidiaries
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