Two dates stand out as pivotal for future historians: February 24, marking the full-scale invasion of Ukraine, and October 7, when the U.S. government introduced a transformative policy. On that day, the Commerce Department enacted a de facto ban on exporting America’s most advanced computer chip technology to China. These chips, essential for powering modern artificial intelligence (AI) models, are now restricted, a move with potentially far-reaching economic and geopolitical implications.
The newly issued regulations impose new restrictions on the sale of American AI chips, except for some designed explicitly for non-military applications. They also limit the number of GPUs each country can buy, a measure designed to limit the power of AI modeling clusters that train the most sophisticated AI models. Several leading tech groups, including Nvidia, have condemned the rushed policy, saying it could stifle innovation and hamstring American companies already losing market share to Chinese competitors.
Despite the criticism, analysts widely expected the policy, which is part of a broad effort by the administration to hobble China’s growing dominance in AI development and chip design. In a statement, Commerce Secretary Gina Raimondo called it “a critical step to maintain U.S. leadership in AI, ensure allied nations can access the latest technology and avoid potential risks,” while also closing loopholes that adversaries could exploit.
But a key question is whether the new rules will affect China, which has invested heavily in its own chip manufacturing capabilities. As the chief executive of Dutch semiconductor machine manufacturer ASML recently explained, China’s efforts to catch up in high-end chipmaking have shifted its focus from R&D to volume production. As a result, it now lags about 10 to 15 years behind the West regarding chipmaking capacity.
US officials are betting that the new regulations will create enough friction between China and its allies to buy the US time to widen its lead. The regulations have a 120-day comment period and will take effect before President Biden leaves office, giving the incoming Trump administration a chance to weigh in as well. But it’s a risky bet that will require close coordination with allies. If the incoming administration does not take the same approach, it could see Beijing seize this opportunity to accelerate its state-backed drive to indigenize global semiconductor supply chains and buy itself an unparalleled long-term advantage in AI. As such, the new AI chip rules will likely face intense scrutiny and resistance from the US industry and the world. It will be a crucial test of the Obama administration’s ability to protect its legacy in AI.