The U.S. Department of Commerce issued a notice on Sunday requiring exporters to obtain a license before sending advanced AI processors to entities that are ultimately headquartered in China. The Bureau of Industry and Security, which enforces export controls, said the move addresses a route that may have been used to ship advanced chips to Chinese firms through subsidiaries based outside the country.
Officials indicated that products from Nvidia and AMD could have been supplied to foreign subsidiaries of Chinese companies for nearly a year, despite broader restrictions on sales of cutting-edge AI chips to China. The licensing requirement effectively closes a potential loophole in the U.S. export-control regime.
Policy actions earlier in the cycle had left some flexibility. The Biden administration did not enforce the so-called "AI Diffusion Rule" in May 2025, which had created an opening for certain shipments under specific circumstances. The Biden administration had previously blocked the sale of advanced AI chips to China - restrictions that had been tightened by the Trump administration.
More recently, there was a partial relaxation in which Nvidia was allowed to sell its second-most advanced chip to 10 approved Chinese entities after a decision by the prior administration. Reports indicate that only a small number of sales were completed under those approvals.
At the same time, China has been seen advancing its efforts toward technological self-reliance in the AI sector, including development of domestically produced chips by firms such as Huawei. An AI startup, DeepSeek, has said its latest models were developed to run on Huawei hardware, illustrating the interest in alternatives to foreign processors.
Context and implications
The Commerce Department's licensing requirement targets exports of advanced processors to entities with ultimate headquarters in China, regardless of whether those entities are located outside China at the point of sale. The announcement suggests authorities believe that overseas subsidiaries may have been used to receive advanced chips that otherwise would have been restricted.
This step will affect suppliers of high-end AI processors and entities involved in global semiconductor distribution, and it will be relevant to companies whose products were previously permitted to ship to a limited set of approved Chinese recipients.