Nvidia's resumption of AI chips to China is part of rare earths talks, says US

By Jarrett Renshaw and Karen Freifeld

WASHINGTON/BEIJING/HONG KONG (Reuters) -Nvidia's planned resumption of sales of its H20 AI chips to China is part of the United States' negotiations on rare earths, US Commerce Secretary Lutnick said on Tuesday, and comes days after its CEO met U.S. President Donald Trump.

"We put that in the trade deal with the magnets," Lutnick told Reuters, referring to the agreement Trump made to restart rare earth shipments to US manufacturers. He did not provide additional detail.

Nvidia - which had forecast the curbs would cut its revenue by $15 billion - said late on Monday that it is filing applications with the U.S. government to resume sales to China of the H20 graphics processing unit (GPU), and has been assured by the US it will get the licences soon.

Shares of the world's most valuable firm - whose CEO Jensen Huang is visiting Beijing and set to speak at an event on Wednesday - rose 4%.

The planned resumption is a reversal of a key export restriction designed to keep the most advanced AI chips out of Chinese hands over national security concerns, an issue has found rare bipartisan support. It drew swift questions and criticism from US legislators on Tuesday.

“The Trump Administration’s misguided decision to allow Nvidia to resume H20 chip sales to China would not only hand our foreign adversaries our most advanced technologies, but is also dangerously inconsistent with this Administration’s previously-stated position on export controls for China," Democratic US Representative Raja Krishnamoorthi, ranking member of the House of Representatives Select Committee on China, said in a statement.

Republican John Moolenaar, chair of that committee, said in a statement he would seek "clarification" from the U.S. Commerce Department about Nvidia's announcement. 

"The H20 is a powerful chip that, according to our bipartisan investigation, played a significant role in the rise of PRC AI companies like DeepSeek," Moolenaar said, referring to a Chinese startup that claims to have built AI models at a fraction of the cost of US firms such as OpenAI. "It is crucial that the U.S. maintain its lead and keep advanced AI out of the hands of the CCP."

Nvidia's plan to resume sales has set off a scramble at Chinese firms to buy H20 chips, two sources told Reuters. The chips that Nvidia will resume selling are the best it can legally offer in China but lack much of the computing power of the versions for sale outside of China because of previous restrictions put in place by Trump's first administration and then President Joe Biden's administration.

But critically, H20 chips work with Nvidia's software tools, which have become a de facto standard in the global AI industry. Huang has argued that Nvidia's leadership position could slip away if the company cannot sell to Chinese developers, who are being courted by Huawei Technologies with chips produced in China.

Huang is set for a media briefing in Beijing on Wednesday when he attends a supply chain expo.

"The Chinese market is massive, dynamic, and highly innovative, and it's also home to many AI researchers," he told Chinese state broadcaster CCTV on Tuesday. "Therefore, it is indeed crucial for American companies to establish roots in the Chinese market." 

China generated $17 billion in revenue for Nvidia in the fiscal year ending January 26, or 13% of total sales, based on its latest annual report. China generated $17 billion in revenue for Nvidia in the fiscal year ending January 26, or 13% of total sales, based on its latest annual report. 

Internet giants ByteDance and Tencent are in the process of submitting applications, the sources familiar with the matter said. Central to the process is an approved list put together by Nvidia for Chinese companies to register for potential purchases, one of the sources said.

ByteDance and Tencent did not respond to a request for comment. Nvidia declined to comment on the approved list system.

Asked at a regular foreign ministry briefing in Beijing about Nvidia's plans to resume AI chip sales, a spokesperson said: "China is opposed to the politicisation, instrumentalisation and weaponisation of science, technology and economic and trade issues to maliciously blockade and suppress China."

Huang's visit is being closely watched in both China and the United States, where a bipartisan pair of senators last week sent the CEO a letter asking him to abstain from meeting companies working with military or intelligence bodies.

The senators also asked Huang to refrain from meeting with entities named on the United States' restricted export list.

Rival AI chipmaker AMD also said the U.S. Department of Commerce would review its licence applications to export its MI308 chips to China; it plans to resume those shipments when licences are approved, it said. Its shares gained 7% in trading on Tuesday.

(Reporting by Liam Mo and Che Pan in Beijing, Anne Marie Roantree in Hong Kong, Surbhi Misra, Arsheeya Bajwa and Akriti Shah in Bengaluru, Stephen Nellis in San Francisco, Jarrett Renshaw, and Trevor Hunnicutt in Washington; Karen Freifeld in New York. Editing by Clarence Fernandez, Shinjini Ganguli, Louise Heavens, Mark Potter and Nick Zieminski)