On Sunday, May 31, the U.S. Department of Commerce unexpectedly issued guidance on its website, explicitly requiring export licenses for top-tier AI chips such as Nvidia’s Rubin and Blackwell processors and AMD’s MI350x when exported to entities headquartered in China, regardless of where those entities are actually located. The move aims to close a loophole that has persisted for about a year: in May 2025, the Trump administration suspended the AI Diffusion Rule, enacted at the end of the Biden administration to restrict global access to advanced AI chips. The suspension inadvertently created an opening for Chinese companies’ overseas subsidiaries in third countries like Malaysia. The trigger for this guidance was an anonymous document circulating in Washington policy circles on Friday, which bluntly stated that “the floodgates have quietly opened.”
Supply chain sources estimate that over the past year, as many as hundreds of thousands of chips may have flowed through this loophole. Chris McGuire, a senior fellow on China at the Council on Foreign Relations and a former State Department official, posted that this is a “serious problem” and noted that “Chinese companies have likely purchased these chips on a large scale.” McGuire also warned that while the new guidance closes one known loophole, another gap remains unresolved: the additional due diligence requirements for foundries like TSMC regarding potential Chinese shell companies have not been reinstated, meaning the channel for Chinese front companies to place orders through foundries remains unblocked. The Commerce Department did not comment on the matter, and neither Nvidia nor AMD immediately responded.
Reuters | Lianhe Zaobao | CNBC