The Trump administration is preparing to overhaul, and likely rescind, a far-reaching Biden-era regulation controlling the global export of advanced artificial intelligence chips, signaling a significant policy shift driven by industry opposition and geopolitical maneuvering.
While the repeal itself is not yet finalized, according to Bloomberg, the complex ‘AI diffusion rule’ set to take effect May 15 will not be enforced. Instead, officials are developing a replacement framework intended to be simpler yet still robust in managing access to critical technologies like those from Nvidia.
The decision addresses concerns that the Biden rule was overly burdensome. A Commerce Department spokesperson criticized the outgoing regulation, stating “The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation… We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.”
The AI diffusion rule, unveiled in the final weeks of the previous administration, established a complex three-tiered system categorizing countries based on perceived risk, imposing licensing requirements for AI chip shipments to many nations previously facing no such controls, including India, Switzerland, and Mexico. The framework also included novel controls on AI model weights, the future of which under the Trump administration is also reportedly under discussion.
Industry Debate and Geopolitical Factors
While scrapping the Biden framework, officials indicate the intent is not to weaken controls but to replace the Biden framework with a potentially simpler, yet still robust, system. This new approach, still under development, may involve more targeted controls, potentially focusing on countries identified as diverting chips to restricted destinations like China – Bloomberg specifically mentioned Malaysia and Thailand as possibly facing new scrutiny. Bilateral agreements with nations seeking access to top-tier US AI technology could also feature in the new approach.
This policy shift coincides with President Trump’s upcoming visit to the Middle East. Countries in the region, notably the UAE and Saudi Arabia, already subject to earlier chip restrictions, have lobbied against the curbs. The UAE, in particular, has reportedly pushed for a government-to-government chip access agreement, bolstered by a pledge of significant investment in US technology and infrastructure.
The move follows significant pushback from the tech sector. Nvidia, the leading AI chipmaker, has consistently objected to expanding restrictions, arguing they could inadvertently push allies closer to China. This stance was amplified following the administration’s mid-April decision to ban Nvidia’s H20 chip – a processor specifically designed to comply with *earlier* export controls – from being sold to China, resulting in a $5.5 billion charge related to unsellable inventory. That ban itself was an escalation of controls that had already barred more powerful chips like the H100 and A100 from China.
The debate over the appropriate level of control was highlighted in a public clash between Nvidia and AI developer Anthropic. Anthropic argued strongly for stricter controls, citing national security “maintaining America’s compute advantage through export controls is essential for national security and economic prosperity” and even alleging sophisticated smuggling methods like “prosthetic baby bumps” and items “packed alongside live lobsters.”.
Nvidia countered that the focus should be on American innovation rather than restrictive regulations, with a spokesperson stating, “American firms should focus on innovation and rise to the challenge, rather than tell tall tales that large, heavy, and sensitive electronics are somehow smuggled in ‘baby bumps’ or ‘alongside live lobsters.'” and emphasizing China’s own capabilities: “China, with half of the world’s AI researchers, has highly capable AI experts at every layer of the AI stack. America cannot manipulate regulators to capture victory in AI”.
Global Competition and China’s Rise
Underlying the policy debate is the intensifying US-China tech competition. US export controls, while aimed at limiting China’s access to advanced AI capabilities, have simultaneously fueled China’s drive for semiconductor self-sufficiency, spurred partly by existing US sanctions.
Domestic players like Huawei are rapidly advancing, preparing mass shipments of chips like the Ascend 910C and developing large-scale systems positioned as direct alternatives to restricted Western hardware. Analysts like Paul Triolo have suggested that US curbs “will mean that Huawei’s Ascend 910C GPU will now become the hardware of choice for (Chinese) AI model developers and for deploying inference capacity.”, as reported by Reuters. While enforcement remains a challenge due to complex global supply chains, the US policy continues to adapt in the face of technological advancements and international pressure.
While the overhaul provides a potential reprieve for chipmakers like Nvidia, which is reportedly already working on new compliant chips for the Chinese market, and for countries previously facing new restrictions under the diffusion rule, the administration stresses that existing controls remain firmly in place. The final shape of the new framework will determine the future landscape for global access to cutting-edge AI technology.
