US tells companies to stop passage of Nvidia's Blackwell AI chips to China

The US Commerce Department quietly posted a notice on its website on Sunday that does something Washington has been dancing around for a year: it shuts a loophole that may have funnelled hundreds of thousands of Nvidia's most powerful AI chips to Chinese companies through their offices in countries like Malaysia.

The Bureau of Industry and Security said export licence rules in place since 2023 also apply to subsidiaries of China-headquartered firms operating outside Chinese borders—a clarification that lands a year after the Trump administration scrapped the Biden-era AI Diffusion rule and left a gap wide enough for Blackwell processors to slip through.The timing tells its own story. The guidance went up the same weekend a paper started circulating in Washington warning that "the floodgates have quietly opened," Reuters reported.

No author was listed on the document, but the message clearly landed inside the Commerce Department.

A year-old policy reversal quietly turned into a Blackwell shipping route

When the Trump administration declined to enforce the AI Diffusion rule in May 2025, it framed the call as cutting "burdensome new regulatory requirements." What it also did was leave the question of overseas Chinese subsidiaries hanging. Chip industry sources told Reuters that hundreds of thousands of advanced AI chips may have shipped through that opening over the past year.

Chris McGuire, the former State Department official who worked on these controls under Biden, wrote on X that Chinese companies had very likely been buying these chips at scale, and because BIS never spelled out what it was enforcing, all of it was legal.

The new BIS guidance fixes one hole and leaves two more wide open

BIS now says it will enforce licence requirements on advanced chips going to any entity headquartered in China, regardless of where the office actually sits. Nvidia said the guidance does not change its operations—a spokesperson noted that licences had always been required to ship controlled products to PRC-headquartered companies.

AMD, the other big AI chip maker affected, did not immediately respond to media requests.The new notice still has gaps. It does not force data centres that already bought these chips to stop using or servicing them. And it does not tighten due diligence on TSMC and other foundries manufacturing the chips on Nvidia's behalf, leaving room for Chinese front companies to keep placing orders through Taiwan.The crackdown also lands in an awkward stretch for Nvidia's China business. Trump cleared the company to sell its H200 chip to Chinese firms in December 2025, but Beijing has steered its own AI players toward domestic chipmakers Huawei and Cambricon, and not a single H200 has been bought since the approval. The Blackwell, Nvidia's flagship and a clear step ahead of anything Chinese rivals are currently shipping, remains formally off-limits to China.

Whether it actually was, until this weekend, is now the question Washington wants closed.