The United States will permit exports of Nvidia’s H200 processors the company’s second-most powerful artificial intelligence chips to China under strict conditions, President Donald Trump announced on Monday. The decision introduces a 25% fee on such sales and seeks to balance commercial interests with national security concerns.
Nvidia’s shares rose by 2% in after-hours trading following the announcement on Trump’s Truth Social platform, after gaining 3% earlier in the day. Trump said he had informed Chinese President Xi Jinping of the decision and received a “positive” response. The U.S. Commerce Department is now finalising the details of the arrangement, which will also apply to other chipmakers, including AMD and Intel.
Balancing Security and Trade
Trump said the 25% levy would be collected as an import tax when chips arrive in the United States from Taiwan, where they are manufactured, before being cleared for export to China following a U.S. security review. He added that the policy aims to “protect national security, create American jobs, and keep America’s lead in AI.”
Administration officials described the move as a compromise allowing limited sales of the H200 while continuing to block exports of Nvidia’s more advanced Blackwell chips. The approach is intended to prevent China from turning to domestic suppliers such as Huawei for advanced AI processors. Nvidia welcomed the policy, saying that offering H200 chips to approved customers “strikes a thoughtful balance that is great for America.”
Concerns over China’s Military Use
Critics in Washington warned that the decision could strengthen China’s military capabilities. Several Democratic senators called the move a “colossal economic and national security failure,” while Republican Representative John Moolenaar said China would “rip off” the technology and reproduce it domestically.
China, meanwhile, has been urging its tech firms to reduce reliance on U.S. hardware. The country’s cyberspace regulator recently accused Nvidia’s downgraded H20 chips of posing “backdoor security risks,” which the company has denied. Despite these warnings, analysts believe Chinese companies will still seek to buy H200s, which remain superior to locally produced alternatives.
Market and Industry Impact
The policy announcement came on the same day the U.S. Justice Department revealed it had dismantled a China-linked smuggling ring accused of illegally exporting $160 million worth of Nvidia chips. Industry analysts say the move could reshape the competitive landscape for AI hardware, as China continues to promote domestic chipmakers such as Huawei, Cambricon, and Moore Threads.
China’s STAR Chip Index and CSI Semiconductor Industry Index both dipped at market open on Tuesday but quickly recovered most of their losses.
(with inputs from Reuters)
