U.S. Commerce Department Imposes New Licensing Requirements on AI Chip Sales to Chinese Firms Operating Abroad

U.S. Department of Commerce posted guidance on its website Sunday that closes a loophole allowing exports of advanced AI chips to Chinese-headquartered entities located outside China. The guidance requires export licenses for those chips even when the purchasing entities operate abroad.

It reverses a May 2025 decision not to enforce the AI Diffusion rule that the Biden administration issued in its final days. The AI Diffusion rule had set conditions for global shipments of advanced semiconductors. By declining to enforce it, the Commerce Department left open a route for overseas subsidiaries of Chinese firms to acquire the chips without licenses.

One chip industry source with deep supply-chain knowledge estimated that hundreds of thousands of the chips moved through that channel during the year the loophole existed. It remains unclear exactly how many units were exported. Nvidia's most sophisticated Rubin and Blackwell processors and AMD's MI350x are among the chips covered by the new licensing requirement.

The guidance does not require data centers already using the chips to stop operations or to cut off service to servers. McGuire said the loophole allowed the overseas subsidiaries of Chinese companies to buy Nvidia Blackwell chips without a license. "Chinese companies have been buying these chips, very likely at scale," McGuire said.

The Commerce Department, Nvidia, and AMD did not immediately respond to requests for comment.