Nvidia’s ability to get a reprieve from restrictions on chip sales to China could mark a shift in the U.S.-China technology rivalry, as well as pave the way to a further de-escalation in the tensions that rattled markets just months ago.
The chip manufacturer said overnight that it had been given assurances that it could sell its H20 artificial-intelligence chips in China again, despite restrictions that were put in place in April. The news came shortly after Chief Executive Jensen Huang met with President Donald Trump and as he embarked on a China trip.
In a Bloomberg News interview Tuesday, Treasury Secretary Scott Bessent said the loosening of restrictions “was a negotiating chip” used in talks held earlier in Geneva and London. The two sides had met as they tried to reset their relationship after a ratcheting up of tensions that left tariffs at three-digit levels and China curtailing U.S. access to critical minerals, including those used in magnets crucial to autos, other industrial products, and some military applications.
The U.S. has increasingly relied on a web of export controls to limit China’s access to advanced technology as the rivalry between the countries has deepened. The restrictions have been a major sticking point for Chinese leader Xi Jinping, who has been seeking a loosening of those rules.
Paul Triolo, a partner at geopolitical consultancy DGA-Albright Stonebridge Group, described the easing of restrictions on AI chips as “a major and surprising U.S. concession.”
“This was a big moment in U.S. China technology competition, as the U.S. blinked, given the criticality of rare earths and particularly magnets,” he said. “The leverage Beijing gained from these controls has been parlayed deftly into a major concession on export controls.”
Among some U.S. officials, including David Sacks, the government’s artificial-intelligence and cryptocurrency czar, there is a recognition that controls on advanced AI hardware, such as the H20 chips that are primarily used for AI inference, were counterproductive, Triolo said. The concern, he said, is that the restrictions could hurt U.S. technology companies like Nvidia. Blocking sales to China could erode their dominance in AI hardware and software, while hastening Chinese companies’ use of domestic alternatives,
That would increase the chance the Chinese companies become entrenched in AI infrastructure elsewhere.
“The reversal in policy is a win for those who believe that the best way to stay ahead in the tech race is for American companies like Nvidia to be able to sell advanced technologies, unhindered, globally,” said Navin Girishankar, president of the economic and security department at the Center for Strategic and International Studies. He previously served as a Commerce Department official, working on issues including critical and emerging technologies in the Biden administration.
“It also signals the sobering reality that the U.S. has a lot less leverage in its economic relationship with China that previously thought.”
Analysts said the move not only shows China’s leverage, with its dominance in critical minerals, but it also followed a pattern seen in the president’s first term: Trump is willing to listen to corporate and finance titans and grant exemptions and exceptions.
“If you get a CEO who has a great story—and Jensen Huang has a fantastic story as the most successful company in the world by market cap—[Trump] loves it,” said Derek Scissors, senior fellow at American Enterprise Institute, who briefly worked in the first administration. “I have recommended it to other CEOs and it works.”
Others expect de-escalatory moves to continue, at least for a bit, as Trump eyes a trip to China to meet with Xi, possibly alongside U.S. chief executives this fall. “It seems like there are some ‘play-nice’ moves going on both sides,” said Arthur Kroeber, head of research at Gavekal, noting Beijing’s recent approval of a merger between Synopsys and Ansys that had been in limbo for a while.
The latest de-escalation could add to the market’s growing view that coming tariff deadlines, including the Aug. 12 one for China tariffs to resume, could be extended and that the U.S. and China, for now, are trying to dial down the temperature.
Write to Reshma Kapadia at reshma.kapadia@barrons.com
