U.S. President Donald Trump is reportedly considering new export restrictions on AI chips produced by companies such as Nvidia, targeting Malaysia and Thailand. The move aims to curb the suspected illegal rerouting of U.S.-made semiconductors into China.
Although the Biden administration has already banned the sale of Nvidia’s H20 chips to China due to national security concerns, officials believe additional measures may be necessary. According to sources, restricting exports to these Southeast Asian nations could effectively cut off key alternative channels through which China might access U.S. semiconductors.
The U.S. Commerce Department has reportedly drafted a version of the proposed rule, which is currently under review and yet to be finalized.
Sources further indicate that the Trump administration may also consider formally repealing Biden’s AI “diffusion rule” — a global framework that imposed broader limits on semiconductor exports. The Biden-era policy aimed to stem smuggling and reinforce the American chip industry, but it has faced criticism from trade partners and major tech companies, including Nvidia.
In May, the Commerce Department pledged to replace the diffusion rule with what it called a “bold and inclusive strategy.” Nonetheless, critics argue that the proposed replacement lacks clarity, especially in defining security protocols for the international use of U.S.-made AI chips — a particularly sensitive issue in regions like the Middle East.
It remains uncertain whether Trump officials will eventually broaden the scope of AI chip export controls beyond Malaysia and Thailand. The department has merely stated that U.S. allies would only be permitted to purchase such chips if the systems are operated by vetted American data center providers and managed by approved U.S. cloud infrastructure firms.
Nvidia Responds: No Evidence of Chip Diversion
In May, Nvidia CEO Jensen Huang dismissed allegations that AI chips were being redirected to China. He asserted that the company’s hardware is too large and complex to be smuggled easily and that clients are well-informed about export regulations.
“There’s no evidence of AI chip diversion,” Huang said. “These systems are massive. The Grace Blackwell system alone weighs nearly two tons — you’re not putting that in your pocket or backpack anytime soon.”
Reactions from Southeast Asia
In response to the potential restrictions, the Thai government told Bloomberg that it is still awaiting further clarification. Malaysia’s Ministry of Investment, Trade and Industry emphasized the importance of transparent and stable regulatory frameworks for the technology sector.
Despite U.S. concerns, tech investments in Malaysia continue to grow. Companies like Oracle have ramped up their data center initiatives in the country, and chip-related exports have surged.
Earlier this year, U.S. authorities warned the Malaysian government of potential chip diversion activities. In June, Malaysia’s trade ministry confirmed that a China-based firm was using Nvidia-equipped servers within the country for large language model (LLM) training. It said it was working with relevant agencies to investigate whether any local laws had been breached.
The Wall Street Journal reported that in March, a group of Chinese engineers arrived in Malaysia carrying suitcases filled with hard drives. The report alleged their goal was to utilize Nvidia-powered servers in Malaysian data centers to train AI systems.
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