The US Commerce Department is closing a loophole that let Chinese companies buy advanced AI chips from NVIDIA and AMD through foreign subsidiaries. The new rule requires licensing for such purchases, targeting entities headquartered in China but operating elsewhere.
New licensing rule targets Chinese-headquartered entities abroad
The loophole allowed Chinese firms to bypass export controls by setting up subsidiaries in other countries. These subsidiaries could then legally acquire high-end GPUs and AI chips from US vendors like NVIDIA and AMD.
According to a chip industry source cited by Reuters, hundreds of thousands of advanced AI chips may have reached Chinese subsidiaries over the past year. The volume highlights the scale of the diversion.
Federal prosecutors have already charged the co-founder of Super Micro Computer for allegedly diverting $2.5 billion worth of NVIDIA GPUs to China. That case underscores the enforcement push.
The new licensing requirements take effect immediately, according to the Commerce Department. Companies must now apply for licenses before shipping advanced AI chips to any entity headquartered in China, regardless of location.
The rule closes a significant gap in US export controls on AI hardware. It aims to prevent Chinese firms from accessing cutting-edge chips used for AI training and data centers.
The confirmed action is the licensing requirement for advanced AI chips destined for Chinese-headquartered entities abroad. The Justice Department has also pursued criminal charges related to GPU diversion.
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