Why did Trump admin allow Nvidia to resume H20 AI chips sales to China?

US Commerce Secretary Howard Lutnick said the administration has allowed the resumption of sales of H20 AI chips because the company will not be giving its best technology to China

US Commerce Secretary Howard Lutnick on Tuesday (local time) said that Nvidia's resumption of sales of its H20 graphics processing unit (GPU) chips to China is part of the negotiation between the US and China over rare earths, Reuters reported.

 

"We put that in the trade deal with the magnets", he said, referring to an agreement that US President Donald Trump made to restart rare earth shipments to American manufacturers.

 

Lutnick added that the US has allowed the resumption of sale of H20 AI chips because the company will not be giving its best technology to China, adding that Nvidia wants to sell its “fourth best” chip, which is slower than the fastest chips that US companies use. Speaking to CNBC, he said, "We don’t sell them our best stuff, not our second best stuff, not even our third best."

 

 

Earlier on Monday, Nvidia, in a blog post, announced that it is filing applications with the US government to resume the sale of its H20 artificial intelligence chips to China, adding that the US government assured the company of granting licences soon.

 

The change in stance is a planned reversal of an export restriction by the US that was imposed in April to tighten its control over the trade of advanced artificial intelligence technology with Beijing as part of its strategy to put pressure on China amid the tariff dispute. Besides, the Trump administration aimed to keep the most advanced artificial intelligence chips out of China's hands over national security concerns.

 

Criticism over Trump's policy reversal on H20 chips sales

 

On Tuesday, the US legislators raised questions and criticised the change in the Trump administration's stance over the resumption of H20 chip sales to China.  Democratic Representative Raja Krishnamoorthi said, "The decision would not only hand our foreign adversaries our most advanced technologies, but is also dangerously inconsistent with this Administration's previously-stated position on export controls for China."

 

Republican John Moolenaar also said he would seek clarification from the Commerce Department. "The H20 is a powerful chip that, according to our bipartisan investigation, played a significant role in the rise of PRC AI companies like DeepSeek," he added.

 

Nvidia CEO meets Trump

 

The reversal in the policy came after Nvidia's Chief Executive Officer (CEO), Jensen Huang met with Trump and policymakers during his visit to the US. 

 

During his visit to the US, Huang expressed Nvidia’s support for the Trump administration’s initiatives to boost employment, including its ambition to lead in the global AI landscape. In contrast, during his engagements in China, Huang held discussions with officials focused on the positive impacts of artificial intelligence and strategies to promote the development of safe and secure AI technologies for the broader good. 

 

China's response to the pause in the sale of H20 chips

 

China has previously condemned the US for abusing export controls and targeting its technology companies. A Financial Times report suggested that, in response, major Chinese tech firms have begun the process of switching their AI development efforts to domestically produced chips. Companies such as Alibaba, Tencent, and Baidu are testing alternative semiconductors to address rising internal demand and the needs of their AI-focused clients.