U.S. Commerce Secretary Howard Lutnick addressed the licensing requirements governing Nvidia Corp.’s (NASDAQ:NVDA) sales of its advanced AI chips to China during a hearing on Tuesday.
Lutnick stated that Nvidia must adhere to the detailed licensing terms for the sale of its second-most-advanced AI chip, the H200, to China, Reuters reported on Tuesday.
He explained that the terms, which were developed in collaboration with the State Department, are detailed and non-negotiable.
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Reportedly, Nvidia had not agreed to the proposed conditions that would prevent China’s military from gaining access to the chips.
The U.S. agreed to permit Nvidia to sell its AI chips to China after a trade truce between Presidents Trump and Xi Jinping in South Korea last October.
Despite President Trump’s approval of Nvidia’s export of H200 chips to China, the sale is still awaiting final clearance from the U.S. government, pending a national security review.Competition Increases as Chinese Firms Seek Alternatives
While Nvidia waits, Chinese e-commerce juggernaut Alibaba Group Holding Ltd. (NYSE:BABA) has introduced its self-developed high-end AI chip through its T-Head unit, aiming to reduce reliance on Nvidia.
This move could have significant implications for Nvidia’s market share and potential revenue in China.
In December, Nvidia CEO Jensen Huang secured a deal with President Trump to reopen Nvidia’s market presence in China, which Huang views as a potential $50 billion opportunity.
However, the formal approval, granted in January, has yet to result in final clearance for H200 chip shipments.
Despite these delays, China’s industry ministries have reportedly approved the import of the first batch of H200 chips, with initial authorizations granted to three major Chinese internet companies.
However, the National Development and Reform Commission is still finalizing the terms.As a result of the delays, Chinese AI firms have resorted to purchasing more expensive black-market hardware or lower-performing domestic alternatives, such as Huawei’s Ascend series.