US to Rejig Export Curbs for AI Chips, 'Shift to Licensing Deals'

The Trump Administration plans to modify the US government’s export rules for advanced computer chips, the Department of Commerce said on Wednesday.

Officials will scrap the system set up under President Joe Biden that restricted sophisticated chips used for artificial intelligence systems and technology exports – and replace it with a global licensing regime with government-to-government agreements, sources have told Reuters.

The regulation issued in January, known as the Framework for Artificial Intelligence Diffusion, aimed to keep advanced computing power in the United States and among its allies, to maintain US leadership in AI, while seeking to block China’s access to advanced chips that could enhance its military capabilities.

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‘Simpler system sought’

But a Commerce spokeswoman said: “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.”

Last week, Reuters reported the Trump administration was working on changes to the rule that would limit global access to AI chips, including possibly doing away with its splitting the world into tiers that help determine how many advanced semiconductors a country can obtain.

According to the Commerce spokeswoman, officials “didn’t like the tiered system” and said the rule was “unenforceable.”

The Biden rule divided the world into three tiers: 17 countries and Taiwan were in the first tier, which could receive unlimited chips.

Some 120 other countries were in the second tier, which was subject to caps on the number of chips the countries could receive. In the third tier, countries of concern including China, Russia, Iran and North Korea were blocked from the chips.

But Trump administration officials are weighing discarding the tiered approach to access in the rule and replacing it with a global licensing regime with government-to-government agreements, sources told Reuters last week.

She did not have a timetable for the new rule and explained that debate was still underway on the best course of action. The Biden rule is set to take effect next Thursday – May 15.

Analysts air doubts on new system

Shares of Nvidia, an AI chip designer whose sales could rise if the rule were changed to increase exports, ended 3% higher after the news came out on Wednesday, but then dipped in after-hours trade.

The AI chipmaking giant’s shares were up almost 2% in premarket trading on Thursday, while stock of its rival Advanced Micro Devices also gained roughly 2%.

Tech companies such as Nvidia had called on Trump to scrap Biden’s AI diffusion rule, claiming that it was an attempt to rig market outcomes and stifle competition.

However, some analysts have warned that a licensing system could potentially be more strict and make it tougher for chipmakers to do business abroad than the system planned by the Biden Administration if they make AI chips a focus of tariff negotiations.

The other concern is that Trump wants to impose tariffs on computer chips, possibly as high as 25% in coming months. But given that chips are usually embedded in servers or smartphones, there is no clarity yet on how that would work.