Trump decided last week that he would allow Nvidia’s H200 AI chip to be sold in China if the company gave a 25 per cent cut. However, experts warn that it may be precisely what Beijing needs to close the gap with US labs.
The H200 may be about 10 times less powerful than Nvidia’s Blackwell flagship, which Washington still blocks, though it remains six times as beefy as the H20, China’s best legal option today.
With Huawei thought to be roughly two years behind Nvidia’s technology, former national security adviser Jake Sullivan told The New York Times that Trump’s decision was “nuts” because “China’s main problem” is a critical shortage of advanced computing.
Sullivan said: “It makes no sense that President Trump is solving their problem for them by selling them powerful American chips. We are literally handing away our advantage. China’s leaders can’t believe their luck,” he said.
Trump was reportedly swayed by Nvidia supremo Jensen Huang and his so-called AI czar David Sacks, who argued that if US firms pulled out of China, then domestic outfits like Huawei would clean up the market and shovel the profits into R&D.
Bloomberg Intelligence estimated Nvidia could reap $10 billion to $15 billion a year from renewed sales, which the White House thinks it can skim at a 25 per cent clip. However, lawmakers across the aisle questioned whether that cut is even legal. Trump claims conditions exist to protect national security, although he has not supplied details.
The Economist called the scheme flawed, noting that US export controls have historically succeeded by starving China of high-end technology. Investors in China did not appear worried about long-term consequences as they piled cash into Moore Threads, which is touted as Beijing’s answer to Nvidia.
Council on Foreign Relations experts said Trump was effectively unwinding the curbs he imposed during his first term. Zongyuan Zoe Liu warned that China “buys today to learn today, with the intention to build tomorrow” and said reversing course showed Beijing that Washington might “back down” under pressure.
Rush Doshi said the move could be “possibly decisive in the AI race” because compute is the main US advantage.
Michael C Horowitz wrote that the decision unquestionably boosts China’s ability to scale data centres and warned US allies might now relax their own restrictions on chipmaking gear, which would compound the damage. Sullivan added that China intends to ditch American silicon “as soon as they can,” making any argument about keeping them dependent meaningless.
Chinese firms, including ByteDance, Tencent and Alibaba, are said to be eyeing the H200, although Beijing has previously warned local companies about possible backdoors that would give Nvidia a kill switch.
Nvidia has denied that any such mechanism exists, although recent revelations about its location verification technology have not reassured everyone. Chinese companies have asked for guarantees that H200 exports will not be slapped with new controls later.
Nvidia once held about 80 per cent of China’s AI chip market, but that share has collapsed to roughly 40 per cent due to export curbs. Chris McGuire forecast Nvidia could ship as many as 3 million H200 units into China next year, which would at least triple China’s available AI compute and could help the country mount an AI Belt and Road plan that challenges US cloud providers worldwide.
Reports in The Information said Beijing held an emergency meeting to weigh the risks and is expected to make a decision soon. Horowitz suggested that China might reject the H200 to force Trump to approve Blackwell-level technology instead.
Nvidia praised Trump’s policy as striking “a thoughtful balance that is great for America” and said it will push ahead with Rubin which is meant to surpass Blackwell. Lawmakers from both parties did not see things the same way.
Representative John Moolenaar said the Chinese Communist Party would use advanced chips to strengthen its military and surveillance systems before adding that “Nvidia should be under no illusions” because China would copy its technology and try to crush it as a competitor. “That is China’s playbook, and it is using it in every critical industry."
House Democrats said national security was “for sale” while Senate Democrats blasted the plan as “dooming” the US in the AI race. Trump’s Justice Department added to the confusion when it arrested two people for smuggling older Nvidia chips into China just hours before the president reversed course on the H200. Trump later called Huang a “smart man” and claimed the Nvidia boss had helped him understand the stakes of the decision.
