James Lynch reported yesterday on the Trump administration’s decision to allow the sale of Nvidia’s advanced H200 semiconductor to China, which was previously blocked by U.S. export controls. The H200 is Nvidia’s second-best chip for the generation of artificial intelligence, which the federal government sought to keep out of the hands of Chinese firms — especially because the AI technology it enables could easily have military applications. Now, however, President Trump thinks it’s completely fine to hand it over to the Chinese, provided his administration gets a 25 percent cut of the proceeds.
I wrote this summer about Trump’s initial decision to allow Nvidia to sell its advanced AI chips to China on the condition that the U.S. government receive 15 percent of the sales revenue. My article called it extortion, but perhaps I was being too harsh. Nvidia is delighted to bypass export controls intended to ensure U.S. security, even if it has to pay for the privilege. In fact, CEO Jensen Huang aggressively lobbied the president to charge a higher rate for Nvidia to sell an even more advanced chip to China.
The chip that the administration previously approved for sale to China, the H20, is a lower-performing model that Nvidia had designed to comply with export controls before these were tightened to restrict it. The H200, in contrast, is the chip Nvidia sells to the rest of the world with no limitations imposed. It has much greater performance, built for frontier-scale AI such as large language models. It will soon be the most advanced AI semiconductor on the Chinese market by a large margin.
The administration is bending over backwards to make this sordid arrangement seem legal, routing the chips from Taiwan through the United States for a cursory “security review” before shipping them off to China. It previously asserted that the technology itself in Chinese hands would be a security risk. The government’s obfuscations aim to disguise what Trump’s policy obviously is: an unconstitutional tax on exports.
China’s government cracked down on Nvidia’s weaker H20 chips after Trump made his 15 percent deal, seeking to protect its native AI chipmakers from competition as its industry develops. With sales stalled, Nvidia pivoted to lobbying to get the H200 chip around export controls. The company still has one generation of semiconductors, its Blackwell line, that is more advanced and still restricted. Perhaps, if China spurns the H200, Trump will eventually let China have the cutting-edge Blackwell chips, too?
There are only two potential explanations for what has happened here. One: If the federal government truly believes that Nvidia’s chips are too dangerous for Chinese firms to have, then Trump is blatantly selling out U.S. national security — blowing a hole in critical export controls for a quick profit. Two: If the government does not believe that the chips are dangerous, then Trump is simply extorting a domestic tech company by applying the coercive power of the state to constrain its business until it coughs up a few billion. There is no third potential explanation.
Unless, maybe, it’s both. Who says that selling off national security and government extortion have to be mutually exclusive?
The president claims that we’re in a momentous AI race against China, the outcome of which will decide whether the world’s leading democracy or autocracy will control one of the most transformative technologies ever created. He’s certainly not acting like it. I suppose this is the odd sort of race in which one runner gives the other his sneakers for a fee.