Trump's Shift on Nvidia Chips Bolsters China's AI Ambitions --- President lifted ban on sales soon after Justice Department filed smuggling case

“SINGAPORE -- With one unorthodox deal, President Trump instantly reshaped the U.S.-China technological Cold War. The fear among his critics: He just helped Beijing catch up.

 

By letting Nvidia sell its H200 artificial-intelligence chips to China, he gave the U.S. company the giant market it demanded. But he also handed China's AI industry what it couldn't build itself: the high-end semiconductors needed to rival the U.S.

 

Until Monday, a political debate swirled around these chips. National-security hawks argued they had to be withheld to stifle China's development of military weaponry and, perhaps one day, advanced AI systems that outfox humans.

 

On the other side was Nvidia with this counterargument: Chinese cash fuels American innovation.

 

Trump effectively settled the argument by siding with the world's most valuable company.

 

"We will protect National Security, create American Jobs, and keep America's lead in AI," he wrote on social media.

 

While the mechanics of the deal remain fuzzy -- Trump said Washington would collect 25% of Nvidia's China sales without explaining how -- the winners are clear.

 

First is Nvidia, the undisputed AI chip leader, which estimated it could ship up to $5 billion in orders to China every quarter without geopolitical constraints.

 

The second is China itself. Its domestic chip makers make inferior products -- and not enough of them.

 

One famous Chinese startup, DeepSeek, has already shown it can do surprising things with relatively few Nvidia chips.

 

It is clear Chinese buyers want these chips. A Justice Department case disclosed on Monday helps demonstrate that. The U.S. Attorney's Office in Houston announced that "Operation Gatekeeper" disrupted a network trying to smuggle at least $160 million of restricted artificial-intelligence chips to China and elsewhere.

 

Since the U.S. restricted sales of Nvidia's top products to China in 2022 for national-security reasons, Chinese buyers have gone to extraordinary lengths to get them. They smuggled chips in suitcases. They rented computing power abroad.

 

Operation Gatekeeper revealed another tactic: fake labels.

 

Prosecutors say a Chinese man in Brooklyn bought chips, falsely indicating they were for customers in the U.S. or unrestricted countries. He and his team allegedly removed Nvidia labels from the products, retagging them with the name of a fake company: "Sandkyan."

 

They then allegedly misclassified the chips as generic computer parts to ship them to China or Hong Kong. The man, now in custody and facing up to 10 years in prison, conspired with employees of a Hong Kong logistics company and a Chinese AI company, prosecutors said.

 

Operation Gatekeeper also targeted Alan Hao Hsu and his Houston company for exporting or trying to export at least $160 million of Nvidia's H200 and older H100 chips to China, Hong Kong and elsewhere. He pleaded guilty and faces sentencing in February. He didn't respond to a request for comment.

 

"The country that controls these chips will control AI technology," said Nicholas Ganjei, the U.S. attorney in Houston. "The country that controls AI technology will control the future."

 

Hours later, Trump said China could have some of those very chips.

 

Released in early 2024, the H200 is roughly one generation older than Nvidia's newer Blackwell chips. To some national-security hawks, that is still too powerful for China.

 

There is a reason for the underground market, suggests a report from the Institute for Progress, a Washington, D.C., think tank. The H200 is about six times as powerful as Nvidia's previous flagship chip in China, called the H20. The H200 is likewise far better than anything from Chinese rivals such as Huawei, the think tank said.

 

The U.S. holds a wide lead in computing power, it said, because China can't manufacture enough AI chips to meet domestic demand.

 

Selling H200s to China would shrink the gap, partly wiping out gains the U.S. gets from newer Nvidia chips, it said.

 

Trump and Commerce Secretary Howard Lutnick "need to answer to Congress on why they are selling out U.S. security," Sen. Elizabeth Warren (D., Mass.) wrote on X.

 

Biden administration officials sought to maintain a big gap, fearing anything that might aid China's march toward the next goal of AI pioneers: artificial general intelligence. AGI systems may be transformative, by independently thinking, adapting and making decisions like a human.

 

China's most famous AI export has shown it can close that gap with second-rate hardware.

 

In January, DeepSeek triggered a $1 trillion stock-market rout with a chatbot rivaling America's best. It said it had trained one of its models with only 2,048 of Nvidia's previous China-specific chips, which had been throttled to satisfy U.S. restrictions.

 

Nvidia opposes strict export controls. Its case: Better to keep Chinese companies in Nvidia's ecosystem, where their spending and know-how fuels U.S. leadership. Export controls backfire by driving China to indigenize its chip industry faster than it otherwise would, the company argues.

 

Trump said on Truth Social that he would block China from getting Nvidia's best, observing that Nvidia's U.S. customers "are already moving forward with their incredible, highly advanced Blackwell chips."

 

Nvidia's hope: As technology advances, Washington clears older chips for export every couple of years.

 

"We applaud President Trump's decision," an Nvidia spokesman said. "Offering H200 to approved commercial customers, vetted by the Department of Commerce, strikes a thoughtful balance that is great for America."” [1]

 

1. Trump's Shift on Nvidia Chips Bolsters China's AI Ambitions --- President lifted ban on sales soon after Justice Department filed smuggling case. Woo, Stu.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 Dec 2025: A1.