Nvidia announced an agreement with Saudi Arabia on Tuesday to develop the kingdom’s artificial intelligence capabilities, a sign of its expanding global strategy.
The partnership goes beyond the AI chip leader’s conventional Western collaborations and may serve as a litmus test for future U.S. export policies with nations that keep close ties with both Washington and China.
But the chip export landscape just got a little more murky.
As Nvidia CEO Jensen Huang was in Saudi Arabia announcing the Blackwell deal, the Trump administration released a new round of AI chip restrictions targeting China.
The Commerce Department issued a warning against the use of U.S. AI chips for Chinese models and singled out “diversion tactics” and securing supply chains to target smuggling.
The release also singled out Chinese tech giant Huawei, labeling the use of the company’s Ascend chips “anywhere in the world” a violation of the export controls.
The new export restrictions came days after the U.S. and China agreed to pause most tariffs on each other, and add another layer of controls for Nvidia to navigate with the White House also eliminating the “AI Diffusion Rule.”
Nvidia declined to comment on the new export controls Wednesday.
The AI diffusion rules, introduced earlier this year by the Biden administration, aimed to control how AI software and chip technology could be shared across borders, with strict limitations on exports to China and other nations labeled high-risk.
The Trump administration’s separate license requirements, which mandate that Nvidia and AMD obtain government approval before exporting advanced chips to China, remain firmly in place.
Commerce said it would announce a full replacement for the diffusion rule in the future.
Chips and trade
President Donald Trump has continued to voice his desire for the U.S. to remain an AI leader while trying to keep top tech out of the hands of China.
That has made Nvidia’s role in the global AI race more precarious, potentially making the company a key bargaining chip in future trade negotiations for Trump.
Instead of broad global restrictions, the Trump administration is reportedly considering a bilateral negotiation model, where advanced AI chips could become a tool in country-by-country trade agreements.
This shift could introduce even greater uncertainty for Nvidia, Bernstein analyst Stacy Rasgon warned.
“Signing multiple bilateral agreements would likely take enormous amounts of time,” Rasgon noted, adding that the new approach could be “potentially worse than the current diffusion framework.”
Nvidia CEO Jensen Huang estimates China to be a $50 billion AI chip market, and while the company still finds ways to sell legally compliant chips to the country, the U.S. is simultaneously tightening restrictions on countries that might re-export advanced tech to Beijing.
Citi analysts cautioned against assuming similar deals elsewhere, noting, “We remain prudent on the duplication of such success with other countries, thus the risk of tighter access to US AI chips for other key countries remains.”
Regulatory workarounds
For Nvidia, navigating U.S. export controls has become a high-stakes game of adaptation
Each time new restrictions are imposed, the company has responded by designing downgraded versions of its chips, such as the H20 and L40. These chips remain powerful enough to appeal to Chinese tech giants while staying just below regulatory thresholds.
The key question for Nvidia investors is no longer whether the company can sell chips globally, it’s whether the coming patchwork of bilateral trade agreements will create a predictable business environment.
If the U.S. takes a more transactional approach to AI chip exports, Nvidia could find itself negotiating different rules for different countries, making long-term strategic planning more difficult.
At the same time, China’s rapid progress in developing domestic alternatives – particularly from Huawei and SMIC – suggests that any gaps left by Nvidia could quickly be filled.
In an April visit to Washington, Huang called Huawei “one of the most formidable technology companies in the world.”
Lobbying Trump
Huang has been outspoken in his opposition to tight chip restrictions, warning that controlling U.S. companies too aggressively could backfire.
“If we lose that ecosystem to our competitors, it will be almost impossible to get it back,” Huang told lawmakers on a recent trip to Washington.
Huang has also worked behind the scenes to push for more flexible trade policies.
Last month, he attended a private, million-dollar dinner at Mar-a-Lago with Trump, part of a broader lobbying effort to ensure Nvidia can continue operating in key international markets.
For now, Nvidia remains caught in the middle: A vital U.S. technology leader that is too important to cut off entirely, but too powerful to be left unregulated. Whether the latest policy shift helps or hinders its global ambitions will depend on the next moves from Washington and how China responds.
