As the Trump administration attempts to block exports of strategically important computer chips to China, experts warn that the effort could backfire, potentially spurring innovation at Chinese companies that may help them dominate the global semiconductor market.
“What’s actually happening is that the U.S. government is handing China a significant win while trying to develop its own chip industry,” said Jack Gold, principal analyst at J.Gold Associates. “Once they’re competitive, they’ll start selling globally, and people will buy their chips.” He added that it would be difficult for U.S. chipmakers to regain lost market share.
Semiconductor giants Nvidia and its U.S. rival, Advanced Micro Devices (AMD), are bracing for major financial setbacks due to new U.S. licensing requirements for semiconductor exports to China. Nvidia expects the new rules to cost the company $5.5 billion, while AMD estimates the impact could be up to $800 million, according to filings with the U.S. Securities and Exchange Commission (SEC).
Nvidia stated that it was told by U.S. officials it must obtain licenses to export its H20 chips to China due to concerns they might be used in Chinese supercomputers. The U.S. had already restricted exports of Nvidia’s most advanced graphics processing units (GPUs), which are used in high-end artificial intelligence models.
Nvidia had developed the H20 chip specifically for the Chinese market, aiming to maximize performance while complying with previous U.S. export rules. However, the new licensing requirements pose an obstacle, according to Gold.
For AMD, the new export restrictions apply to its MI308 GPUs, which are designed for high-performance applications such as gaming and artificial intelligence. The company noted there is no guarantee that licenses for sales to China will be approved.
Independent tech analyst Rob Enderle predicts that Chinese chipmakers, likely led by the giant Huawei corporation, will intensify efforts to take the lead in the semiconductor market. “This will be a huge boost for China as they ramp up their own microprocessor industry,” Enderle said, referring to the stricter U.S. export rules. “This will quickly lead to the loss of U.S. leadership in microprocessors and GPUs.”
The Chinese government has substantial resources and motivation to strengthen its chip industry, according to Gold. He noted that while President Trump may think he can “bully people” to achieve his objectives, “the global economy doesn’t work that way.” Trump’s tariffs have alienated allies, increasing their incentive to turn to China for chips, Gold added.
“Across the board, this is going to create real problems for U.S. companies competitively,” Enderle warned. “Companies abroad will suddenly be in a much better position to compete.”
Nvidia CEO Jensen Huang has stated publicly that the company can comply with the new U.S. regulations without hindering technological progress, adding that nothing will stop the global advancement of artificial intelligence.
“Nvidia is one of the most crucial players in this (U.S.) chess game with China,” said Wedbush analyst Dan Ives in a note to investors. “The Trump administration knows that Nvidia is fueling the AI revolution, which is why they’ve placed a ‘Do Not Enter’ sign in front of China to slow its progress.”
Ives cautioned, however, that the “chip wars” are far from over. He expects more tensions between both sides in the future.
