Donald Trump and Biden administrations can agree on one thing: China is an enemy of the US. To that end, the administration is planning stricter limits on US semiconductors and putting pressure on key allies to tighten their own rules on China’s chip industry. Trump seems to be picking up where Biden left off in this regard.
According to reports, Trump officials recently met with their Dutch and Japanese counterparts to discuss making it harder for engineers from Tokyo Electron Ltd. and ASML Holding NV to operate semiconductor equipment in China.
The goal, which was also important to Biden, is to see key allies match China’s curbs the US has placed on American chip-gear companies, including Lam Research Corp., KLA Corp., and Applied Materials Inc.
The main goal is to stop China from building up its own chip industry, which would help its military and AI. Trump is going to the extent of working on deals with allies that were supposed to happen but never did under the last government.
He might also take on the interests of Biden’s more conservative team members, who couldn’t get everyone on the team to agree on their more extreme policy goals.
Trump takes over where Biden left off
One official said that Biden’s team also gave some other goals to people on Trump’s National Security Council, and the new team was open to them.
One important item is to stop the Chinese company ChangXin Memory Technologies Inc. from buying American technology. This is something that Biden administration officials really thought about doing but decided against because Japan would not support it.
Some people on Trump’s team also want to put more limits on Semiconductor Manufacturing International Corp., which makes chips for Huawei Technologies Co., a Chinese telecom giant.
Biden stopped shipments to some SMIC facilities but set up a case-by-case review for others. Officials are worried that this could let SMIC buy tools that are then used at closed plants. SMIC’s shares recovered from big losses to rise as much as 2.7% in Hong Kong. This was partly due to hopes that Beijing would back the company.
Reports say that the new government also wants to limit sales of chips that Nvidia made just for China. This is obviously because of DeepSeek. Most likely the H20 chips will have restrictions so that the AI startup will have difficulties.
Nvidia’s H20 chip remains the industry standard in China. Analysts estimate Nvidia shipped approximately 1 million H20 units in 2024. This generated over $12 billion in revenue for the company.
Some officials in the government like the idea of limiting the amount of computer power that can be sent abroad without a license. With the rules that are in place now, chipmakers only need to tell the government before sending up to 1,700 graphics processing units to most other countries. That threshold is too high for some Trump officials. This would make more people need licenses.
Several people said that some of Biden’s NSC officials wanted to implement these stricter rules before he left office. However, Gina Raimondo, who was Commerce Secretary at the time, refused to do so.
Next is the “AI diffusion rule,” which was implemented in Biden’s last week in office. The measure divided the world into three groups and set limits on how much AI computing power could be sent to each group. It also established ways for businesses to ensure the safety of their projects and access to more computing power.
The rule, which will affect the building of data centers from Southeast Asia to the Middle East, was strongly criticized by businesses like Nvidia. CEO Jensen Huang said he was hopeful that the Trump administration would choose less strict rules.
The impact on Nvidia stocks and AI tokens
Nvidia depends heavily on exports. Therefore, every time the US government makes any AI decisions, it is first affected. In fact, even other countries’ development affects the company’s stocks. Recently, when DeepSeek was launched, Nvidia stocks dropped by over 20%.
In retrospect, during Biden’s tenure, the White House announced that the rule would restrict the number of AI processors, known as GPUs (graphics processing units), that most countries can order without a special license to 50,000. Nvidia shares were down, far underperforming the S&P 500 index’s 5% gain during the period.
The market for AI-tagged crypto coins also suffered a sharp decline. This left many tokens with significantly reduced valuations. The AI market cap saw a 10.1% decline in the 24 hours. Most AI tokens lost between 22% to 55% of their market share.
Today, Nvidia stocks have dropped by 3% just from reports about harsher controls on chip sales to China. On the other hand, major AI tokens have recorded a decline of 7% to 11% in the last 24 hours.
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