After months of turbulence, the Trump administration recently reversed its export restrictions on Nvidia’s H20 chip, which it had enacted just a few months prior, citing national security concerns. Once the government approves its export licenses, Nvidia will resume shipping the H20 chip to Chinese buyers.
In the past, Chinese companies, such as DeepSeek, have used Nvidia’s export-controlled chips to improve their AI models. The H20 chip is specifically optimized for AI inference.
The administration is framing its decision to undo its national security controls as part of a broader trade strategy, one in which semiconductors and AI applications are part of complex “deals” to benefit U.S. companies and the country. But the lack of clarity on what these chip sales will actually accomplish—and the obvious national security risks of deepening semiconductor business ties in China, including the funneling of chips into Beijing’s security apparatus—mean this short-term “win” is likely to become a longer-term security misstep.
Officials are defending the export control reversal by saying that Nvidia can sell H20 chips—but nothing more sensitive.
“We don’t sell [China] our best stuff, not our second-best,” Commerce Secretary Howard Lutnick asserted. David Sacks, the White House’s AI and crypto czar, has also argued that allowing Nvidia to sell H20 chips in China would undercut its competitor Huawei’s ability to gain market share.
Those arguments, however, assume H20s aren’t too dangerous—even in the wrong hands. The chairman of the House Select Committee on China, Rep. John Moolenaar (R.,-Mich.), made this point in a letter to the administration, in which he argued that the H20 is a powerful AI inference chip that far surpasses China’s indigenous capability. Sacks’ argument implies that H20s will increase Chinese capabilities: If Nvidia’s H20s will steal market share from Huawei, then it is presumably a superior product than what Huawei offers.
China’s huge market will be tempting for Nvidia, and the pressure to sell more products will grow. Nvidia’s chief executive, Jensen Huang, said so himself at a Beijing press conference. “I hope to get more advanced chips into China than the H20,” Huang said.
And the administration’s flip-flopping on chip export controls underscores how its threshold for what is considered “too risky” can easily shift, regardless of whether the security picture actually changes. H20 sales to China today could quite plausibly become sales of even more advanced chips tomorrow.
The H20 reversal echoes another area where the White House granted risky chip sales in favour of trade deals: the Middle East. In recent years, the U.S. scrutinized the United Arab Emirates for its AI collaboration with Chinese entities. But in June, the Trump administration struck an agreement with the UAE that paved a way for U.S. companies to sell Emirati AI firms hundreds of thousands of chips. The U.S. also moved to sell chips to Saudi buyers. Saudi Arabia poses its own set of tech diffusion and security risks to the U.S., to say nothing of its economic and technological ties to China.
In some cases, the economic benefits of exporting technology outweigh the security risks. Selling to key partners or strengthening U.S. global market share of a specific security-relevant technology can actually boost security. But it is becoming increasingly clear just how much some policymakers, such as the Treasury and Commerce secretaries, are treating national security issues as bargaining chips (no pun intended) in trade negotiations.
Doing so might create a mirage of short-term, superficial wins. Diffusing security-sensitive technologies to U.S. adversaries, however, would be a bigger, long-term mistake.
Justin Sherman is the founder and CEO of Global Cyber Strategies, a research and advisory firm, and a nonresident senior fellow at the Atlantic Council.
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