The US Department of Commerce moved Sunday to close a loophole that allowed Chinese companies to acquire Nvidia's most advanced AI chips through overseas subsidiaries, particularly in Malaysia.
The guidance issued by the Bureau of Industry and Security (BIS) enforces existing license requirements for advanced chip shipments to entities headquartered in China, even when those entities are located outside the country.
The move follows a circulated paper in Washington warning that "the floodgates have quietly opened." One industry source estimated hundreds of thousands of chips may have been exported during the period the loophole was open.
Nvidia stated the guidance changes nothing for the company, as the Commerce Department had already imposed licensing requirements in a letter. AMD did not immediately comment.
Former State Department official Chris McGuire noted the loophole allowed Chinese firms to buy Nvidia Blackwell chips without a license at scale. While the new guidance closes the current gap, McGuire warned it leaves another open: it does not require Taiwan Semiconductor Manufacturing Co (TSMC) and other foundries to perform extra due diligence to ensure high-end chips are not made for Chinese front companies.
The guidance also does not require data centers to stop using the chips or cut off servicing of advanced computing items like servers.