The US plans to scrap a Biden-era rule limiting AI chip exports, which firms like Nvidia and AMD found burdensome. Deemed “unenforceable” due to red tape, the Trump administration intends to overhaul it. This move signifies a more lenient domestic AI regulation approach, aiming to foster US innovation, while preventing adversaries from accessing advanced technology. The new rule, not yet finalized, will likely involve direct negotiations with nations, distinct from existing China-focused restrictions. Nvidia welcomed the change, seeing opportunities for US leadership in AI and job creation.
The United States government is preparing to dismantle a regulation established during the Biden administration. This rule was formulated to restrict the international shipment of AI chips and posed a potential impediment to the sales figures of semiconductor firms like Nvidia and AMD.
An official from the US government said on Wednesday that the aforementioned regulation, which had a scheduled implementation date of May 15, was encumbered by significant bureaucratic complexities that rendered it, in their view, “unenforceable.” As an alternative, the Trump administration is planning to conduct a thorough revision of the existing rule.
This decision from Washington materializes as the current administration adopts a more accommodative stance regarding the regulation of AI and other sophisticated technologies within the country, while also addressing the increasing prominence of Chinese enterprises in this technological domain.
The intended cancellation of the regulation, informally referred to as “the AI diffusion rule,” which has not yet reached its final stage, aimed to reshape a policy initiated under President Biden. That policy had established three general categories of countries for the purpose of controlling the export of chips from Nvidia Corporation and similar companies. According to individuals with knowledge of the situation, the Trump administration does not plan to implement that framework when it is set to become active on May 15. Instead, it is in the process of formulating its own version of these regulations, which is anticipated to emphasize direct negotiations with specific nations, such as the United Arab Emirates or Saudi Arabia.
Modifications to this rule, formally known as “the Framework for Artificial Intelligence Diffusion,” would offer a measure of relief to companies comparable to Nvidia. Without such changes, the semiconductor manufacturing entity would have been constrained by limitations on the volume of AI hardware it could distribute in nations including India, Switzerland, and Singapore.
Nvidia has experienced continuous and intense demand for its graphics processing units, a factor that has elevated it to a position among the globe’s corporations with substantial market valuations within a relatively short period of a few years.
The ongoing policy discussion revolves around the appropriate method for regulating semiconductor shipments to destinations other than China. Officials from both the Trump and Biden administrations have endeavored to curtail Beijing’s ambitions in the semiconductor field, driven by apprehensions that advanced chip and AI technology could provide China with a strategic military advantage.
Rather than permitting the Biden-era controls to come into force within a week, the official indicated that the Trump administration would develop a new rule. This new regulation would aim to foster the prosperity of US technology while simultaneously preventing American adversaries from acquiring access to such technology. The official also advised that the implementation of this new rule would not be immediate and would require a period of time to be established.
The export controls, which were introduced near the end of Biden’s presidential term, instituted a three-level licensing system for AI chips utilized in data centers, such as the high-performance GPUs produced by Nvidia.
These controls were intended to make it more challenging for Chinese companies to bypass US export restrictions by obtaining these chips through third-party countries, occurring within a geopolitical climate marked by rivalry over the infrastructure that underpins AI.
The proposed legislation placed a restriction on the volume of chip exports for all but a select group of countries, which encompassed G7 member nations and Taiwan. More than 100 countries were classified within this intermediate category.
The European Union, Nvidia, and the broader chip and technology industry voiced criticism of these rules, which were then undergoing a period for industry input.
They contended that the rules, as formulated, would inadvertently provide an advantage to Chinese competitors, such as Huawei, as those companies developed and marketed their own AI hardware. This, they argued, would mean missing an opportunity to ensure that a significant portion of the world would depend on American technology.
“We welcome the administration’s leadership and new direction on AI policy,” stated a spokesperson for Nvidia. “With the AI Diffusion Rule revoked, America will have a significant opportunity to lead the next industrial revolution and create well-compensated US jobs, build new US-supplied infrastructure, and alleviate the trade deficit.”
Following this news, the Nvidia’s shares concluded trading 3% higher on Wednesday, while shares of AMD increased by 1.8%.
The chips from Nvidia that possess the greatest processing capabilities are already prohibited from export to China as a result of successive performance-based restrictions implemented under the Biden administration.
Last month, the Trump administration implemented new license requirements for less powerful chips that were specifically designed for the Chinese market by Nvidia and AMD, to ensure compliance with existing export controls.
Nvidia indicated that the prohibition on its H20 chips led to a $5.5 billion reduction in its earnings.
A more extensive national security review concerning potential new tariffs on semiconductors is also in progress, subsequent to a temporary exemption from certain “reciprocal” duties on US trade partners.
Eliminating the AI diffusion framework will not alter the measures specifically targeting China, which President Trump recently intensified. Instead, it is expected to create new avenues for other countries to negotiate their own access to chips, as governments worldwide endeavor to cultivate domestic AI capabilities. These potential agreements could be shaped by promises of investment or by broader trade and diplomatic considerations.
US officials could declare their intention to repeal the AI diffusion rule as early as Thursday, one of the individuals familiar with the matter stated. This timing would precede President Donald Trump’s visit to the Middle East, where several nations have expressed dissatisfaction with the recent restrictions. President Trump’s replacement regulations, which these individuals indicated will aim to strengthen controls on chips internationally, are still being formulated.
“The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation,” the Commerce Department’s Bureau of Industry and Security declared in a statement distributed by a spokesperson. “We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.”
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