President Trump is thinking about tightening restrictions on Nvidia's sales of AI chips to China. This decision stems from national security concerns and the desire to keep American companies ahead in the global market.

According to a Bloomberg report, the administration is considering a possible ban on exporting Nvidia's H20 AI processor to China. The H20 chip is a slower version of the H100 processor, specifically made for the Chinese market while following current U.S. sanctions.

If these new restrictions go into effect, it would be the fourth time since 2022 that the U.S. government has imposed such controls. Tighter limits could hurt Nvidia's profits and potentially reduce the U.S.'s share of the global AI market.

Previous export controls have had some unintended effects. After the U.S. banned the sale of H100 processors to China in October 2022, China turned to its own companies. They began developing AI using less powerful semiconductors and various combinations of AI chips. This move aimed to lessen their reliance on a single source for AI chips and to reduce supply chain risks.

In June 2023, the Biden administration announced plans to impose stricter restrictions on AI chip exports to China. The U.S. Department of Commerce's Bureau of Industry and Security formalized these plans in October 2023. The new rules now also cover modified AI processing chips that were compliant before, along with semiconductor hardware.

Despite these controls, some Chinese state-affiliated entities have found ways to get around U.S. sanctions. They accessed banned AI hardware through cloud computing platforms like Amazon Web Services. By using shell companies or middlemen, they indirectly tapped into cloud computing resources instead of going through Amazon directly.

Critics argue that these export controls make U.S. companies less competitive in the name of national security. They also say that these measures are not effective in stopping other countries from accessing AI computing power.