US Closes Loophole on Nvidia and AMD AI Chip Exports to Chinese Firms Overseas

On Sunday, May 31, 2026, the US Department of Commerce moved to close a year-old loophole that had allowed the most advanced artificial intelligence chips to reach subsidiaries of Chinese companies based outside China. The new guidance, posted on the Commerce Department website, targets the export of high-end processors such as Nvidia Blackwell and Rubin chips, along with AMD MI350x units, when destined for entities headquartered in China but operating in places like Malaysia.

The Bureau of Industry and Security stated that it would enforce license requirements that have been in place since 2023, applying them to entities headquartered in China even when those entities sit outside Chinese borders. A bureau spokesperson said the agency would keep enforcing export controls firmly to protect critical American technology. For Nvidia, the practical situation does not change, since a company official noted that Commerce had already imposed a clear license requirement on the firm through a letter, meaning it could not ship the chips in question.

The gap originated in May 2025 when the Commerce Department announced it would not enforce the AI Diffusion rule issued during the final days of the previous administration. That rule had set licensing requirements governing global access to AI chips. With enforcement paused, overseas subsidiaries of Chinese firms were able to purchase Nvidia Blackwell processors without a license for almost a year. One chip industry source with deep supply-chain knowledge estimated that the volume of chips exported during that window reached into the hundreds of thousands.

A paper circulating in Washington, dated Friday, May 29, 2026, and seen by Reuters, described the situation by saying the floodgates had quietly opened. The document did not list an author. It was after this paper spread that the weekend guidance appeared, an unusual timing that underscored the urgency officials placed on the matter.

Technology and national security expert Chris McGuire, a former State Department official, warned publicly that the loophole had let Chinese companies buy these chips very likely at scale, calling it a major problem. He added that while the new guidance closes this particular gap, it leaves another one open. The remaining issue concerns the dropped requirement that Taiwan-based TSMC and other foundries perform extra due diligence to confirm that the high-end chips they manufacture are not destined for Chinese front companies. McGuire said the guidance did not address that point. A TSMC spokesman declined to comment.

The new measures also stop short of full restriction. The guidance does not require data centers to stop using chips already in place, nor does it cut off the servicing of advanced computing equipment such as servers. This means existing deployments can continue operating even as fresh shipments face tighter scrutiny.

The move arrives against a backdrop of intense pressure on Nvidia's China business. In April 2025 the company was informed that a license would be required to export its H20 products to the China market, a decision that led Nvidia to record a 4.5 billion dollar charge tied to excess H20 inventory and purchase obligations. Nvidia chief Jensen Huang has acknowledged the strength of domestic Chinese competitors such as Huawei and conceded that the company has largely scaled back its presence in the Chinese AI chip market.

As of June 1, 2026, the guidance remains in force and the supply chain implications are still unfolding. AMD had not responded publicly to requests for comment at the time the guidance was issued. Analysts expect the tighter enforcement to reshape routing strategies for advanced chips across Southeast Asia, where transshipment through third countries had become a workaround. The coming weeks will show whether Chinese-linked buyers find new channels or whether the controls meaningfully slow the flow of cutting-edge hardware.