The reversal of Trump AI chip policy shows a shift in how advanced computing technology flows across global markets as the administration prepares to dismantle Biden’s complex three-tier regulatory framework this week.
The Biden administration’s framework for artificial intelligence spread, set to take effect on May 15, 2025, would have created a stratified global technological environment with significant implications for international trade, innovation and geopolitical relations.
The Trump administration believes its existing approach is fundamentally flawed, according to the Commerce Department on Wednesday. “The Biden AI rules are overly complicated, overly bureaucratic and will stymie American innovation,” a Commerce Department spokesperson said. Reuters.
“We’re replacing American innovation with much simpler rules that will free up American innovation and guarantee American AI control,” they said. The policy change comes months after the Biden administration finalised its export control framework in its final week.
The framework represents the culmination of four years of efforts to limit access to China’s cutting-edge chips while maintaining US leadership in artificial intelligence technology. The decision to withdraw the rules reflects the Trump administration’s different approach to balancing national security concerns with commercial interests.
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Understanding three-tier systems
The soon-to-be-retired rules have established a hierarchical structure for global technology access. In the first tier, 17 countries and Taiwan would have enjoyed unlimited access to advanced AI chips.
The second tier of about 120 countries operated under a strict numerical cap that restricted imports. The third final tier, including China, Russia, Iran and North Korea, would have been completely blocked from access to these technologies.
The structured approach aims to prevent advanced technologies from reaching countries of interest through intermediaries, while allowing access to allies and neutral countries. However, critics argued that the complexity of the system creates a critical compliance burden and drives international partners to alternative suppliers.
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A new approach to shape
Instead of a tiered system, the sources cited Reuters It shows that the Trump administration is considering implementing a global licensing regime supported by intergovernmental agreements. This approach may provide more flexibility and may maintain control over sensitive technologies.
The timing of the announcement appears strategically important. Bloomberg He reported that the change is developing as President Trump prepares for a trip to the Middle East. There, countries including Saudi Arabia and the United Arab Emirates have expressed dissatisfaction with existing restrictions on AI chip acquisitions.
Sources familiar with the issue say the Commerce Department’s decision could be announced on Thursday.
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Market reactions and industry impact
News of policy reversals have already caused ripples through financial markets. Shares of Nvidia, the dominant manufacturer of chips used to train AI models, rose 3% on May 7th after its announcement, but fell 0.7% in trading after opening hours. Reuters.
The company has consistently opposed the rise in US restrictions. Nvidia CEO Jensen Huang claims that American companies should be able to sell to China and expect to be a $50 billion market for AI chips over the next few years.
However, it is important to note that changes to Trump AI chip policies do not indicate a complete abandonment of export controls. The administration has already shown a willingness to take strong action against China. Specifically, it shows a move that will cost the company $5.5 billion in writedowns by banning Nvidia from selling H20 chips there. Bloomberg.
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Global winners and losers
Policy reversal creates complex maps of potential winners and losers in a global technology environment. Countries like India and Malaysia saw temporary relief as they did not face tipping restrictions before Biden regulations were announced in January. In Malaysia, this could benefit Oracle Corporation in particular. Oracle Corporation has plans for large-scale data center expansion beyond the limits established by rules governing AI hardware distribution.
Countries in the Middle East can also benefit. The UAE and Saudi Arabia, which have been facing chip export control since 2023, could be able to negotiate more favorable terms.
During his visit to the region from May 13th to 16th, Trump expressed his interest in relaxing restrictions in the UAE and was able to announce the start of work on an AI chip agreement from the government to the government.
The UAE’s aggressive pursuit of such an agreement is supported by a pledge to invest up to $1.4 trillion in US technology and infrastructure over the next decade, exemplifying how these negotiations are profiting for countries looking to establish themselves as AI Powerhouses.
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Future uncertainty
According to Axios, the Trump administration is currently developing a new regulatory scheme. This could emerge as either a new rule or an executive order. The transition period creates significant uncertainty for businesses like NVIDIA regarding the regulatory environment they will face in the coming months.
The new framework takes shape, but it shows that the administration will continue to implement existing chip export controls. One potential component of the new approach may involve impose control, particularly on countries that diverted chips, including Malaysia and Thailand, to China, including Malaysia and Thailand, according to sources familiar with the issue.
Industry stakeholders remain divided on the issue. While chipmakers are actively lobbying against strict export controls, some AI companies, including humanity, advocate for maintaining protections that protect the benefits of U.S. intellectual property and technology.
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Balance of competing priorities
The Biden administration’s export restrictions were designed to limit access to chips needed for cutting-edge AI development, with a focus specifically on preventing Chinese companies from finding indirect routes to technologies that prevented existing export controls from importing directly.
Creating a balanced approach to address national security concerns while promoting US commercial interests poses important challenges. Establishing contracts with a wide range of countries eager to purchase advanced AI chips requires navigating complex diplomatic relations and potentially creating a number of separate policy frameworks.
The Commerce Department does not provide a specific timeline for when finalizing or implementing new rules, but it shows that debate on the best approach continues.
The change in Trump AI chip policy reflects the administration’s broad focus on American competitiveness and innovation, while maintaining control of technology with national security impacts.
As authorities work to create exchange frameworks, the global AI chip market continues to flow, with a major impact on technological development, international relations and corporate strategy in the evolving artificial intelligence landscape.
Also US-China AI Chip Race: Cambricon’s first profit land
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