For nearly a year, Chinese companies were buying the most advanced AI processors on the planet without a license. The revolving door was right in their own overseas subsidiaries, and nobody in Washington bothered to close it — until now.
Update, September 11, 2026. In July, Reuters relayed a Financial Times report that NVIDIA had cut its list of authorized Asian buyers by more than half. The report is unconfirmed; the new section at the end sets out what was reported and by whom.
On May 31, 2026, the Bureau of Industry and Security at the U.S. Department of Commerce issued guidance that effectively plugs a regulatory hole that had been open since May 2025. The order is simple: companies headquartered in China need a license to buy advanced AI chips, regardless of which country they’re buying from. The requirement reads as obvious on paper. Whether it applied at all was the question that stayed open for a year.
To understand how we got here, you have to go back to January 2025, when the Biden administration published the so-called “AI Diffusion Rule”, a set of export controls designed to limit Chinese access to cutting-edge semiconductors. But in May 2025, the Trump administration — which had inherited the rule — announced it wouldn’t enforce it. That decision, presented as regulatory relief, created a massive gray zone: if the new rule wasn’t being applied, did the November 2023 license requirement that preceded it still stand?
In practice, the answer was no. For roughly a year, Chinese companies exploited that ambiguity to channel Nvidia Blackwell and Rubin chips, along with AMD MI350x, through subsidiaries in Southeast Asia — Malaysia being a key hub — without going through the licensing process. One industry analyst cited by Reuters estimated that “hundreds of thousands” of units may have slipped through that route. That figure hasn’t been independently corroborated, but the fact that it appears in Reuters, CNBC, and SCMP gives it weight.
The Trump administration didn’t notice, didn’t act, or both. Either way, a full year passed before BIS itself clarified that yes, the 2023 requirement had always applied. “The guidance reaffirms that Nvidia’s sales and verification process is correct,” a company spokesperson told Al Jazeera. “Licenses are required to ship controlled products to companies headquartered in China.”
An administration that made toughness on China its banner spent a year not enforcing controls its predecessor had put in place precisely for that purpose. In December 2025, while the loophole was still open, Trump himself authorized the direct sale of Nvidia’s H200 chip to China — less powerful than the Blackwell, but six times faster than the previously allowed H20 — with a 25% surcharge. Two policies, two directions, same White House.
BIS was pragmatic about hardware already on the ground: it allowed data centers already operating with chips acquired during the gray period to keep using them without restriction. An AI model already trained on those chips can’t be untrained, and the damage, if there was any, is already done.
Does this solve the problem? Not entirely. Chris McGuire, a former State Department official, noted that the guidance doesn’t require TSMC or other foundries to implement additional controls to verify whether the chips they manufacture end up in Chinese hands through intermediaries. The chip loophole is closed; the manufacturing loophole remains open.
Why It Matters
This episode shows a U.S. export control policy that is, at best, inconsistent. A year of inaction on a critical national security front doesn’t happen by accident. It happens because the bureaucratic machinery doesn’t always follow the rhythm of political rhetoric. For China, it was a window of opportunity. For U.S. companies, uncertainty. For the taxpayer, the uncomfortable question of whether the controls actually control anything.
The “hundreds of thousands” figure remains the big question mark. Nobody outside the supply chain knows with certainty how much equipment crossed over. Until that number is known, the doubt about whether the tech war with China is being won stays open.
Since June: NVIDIA’s Own Checks, as Reported
On July 13 the Financial Times reported, citing three people familiar with the matter, that NVIDIA had more than halved the number of Asian customers authorized to buy its AI chips after introducing a “white list” of companies that passed tougher compliance checks. Reuters relayed the report and said it could not verify it; NVIDIA did not respond, and no statement from the company confirms it.
As reported, the checks cover Singapore, Malaysia and Japan: NVIDIA staff visit customers’ data centers, verify contracts and interview end users, with the Commerce Department providing oversight and political backing. More than half of the previous customers, neo-cloud providers in particular, failed the first review and can reapply after making changes. If the report holds, it answers part of the question above from the seller’s side. It says nothing about the foundry gap McGuire pointed to.