Less than five months after imposing restrictions on the sale of AI chips, the US has now lifted them again. This is mainly due to the fact that the previous rules proved impossible to enforce. At the same time, a new picture may be emerging of which countries the US considers allies.
Chip restrictions were introduced at the beginning of the year to secure the US’s global AI leadership…
In its penultimate week, the Biden administration decided on the “Framework for Artificial Intelligence Diffusion” (FAID). The plan imposed limits on how many advanced chips various countries could purchase. These limits depended on how close an ally a country was considered to be, as well as whether it would support US chip restrictions against third countries. The plan was created at the request of Big Tech and in consultation with the incoming Trump administration. It was regarded as one of the US’s most important geopolitical tools.
But on May 7, the Trump administration announced that it was repealing FAID. This came after a three-hour Senate hearing with Sam Altman (OpenAI), Lisa Su (AMD), and Brad Smith (Microsoft). The AI industry had previously urged lawmakers to establish guidelines for AI development so that safety would not become a concern.
... but was repealed again in May because it is impossible to enforce in practice
However, the industry has now completely changed course. This shift happened especially after JD Vance warned Europeans at the AI Action Summit in Paris in February that “the AI race is not going to be won by hand wringing about safety”.
The repeal is not only due to concerns about hindering AI development. The measures also proved unenforceable in practice. China in particular circumvented the sanctions either by purchasing AI chips through intermediaries or by leasing access to offshore data centers using such chips. This made it possible, among other things, for China to develop DeepSeek.
- Circumvention occurred primarily because the 120 countries that fell under category 2 of the restrictions did not comply with the rules. This includes India, Malaysia, Singapore, and the UAE, whose data protection laws obstructed effective monitoring of rule compliance.
New Rules are Likely Just as Impossible to Enforce
The Trump administration is now considering new rules with the same goal: ensuring that the US remains the world’s leading AI power. The new rules are intended to be simple, so that compliance can actually be monitored.
- ASML’s export ban on EUV machines has been effective so far. This is primarily because each machine weighs 100 tons and is therefore sold only to a few easily traceable buyers.
- However, the ASML ban is likely only a temporary reprieve. The sanctions have significantly increased China’s investment in developing advanced chips.
- By contrast, EUV chips weigh and occupy almost no space, which made tracking and enforcement virtually impossible.
- Finally, it proved unfeasible to monitor which companies purchased access to data centers using EUV chips.
- In Johor, Malaysia, neighboring Singapore, data center capacity has grown from 10 MW in 2021 to over 1,500 MW by the end of 2024. AWS, Google, Microsoft, and Oracle are building these data centers and renting capacity to local firms.
- In the same city, ByteDance has established a presence with research and data center inquiries.
- China’s share of NVIDIA purchases dropped from 22% in 2022 to 13% at the end of 2024. But during the same period, sales to Singapore surged to 18%.
- It’s estimated that only 2% of Singapore’s chips are used locally, suggesting that Singapore has become a nexus for trans-shipment and invoice routing.
- In other cases, NVIDIA’s high-end chips have been sold to small Indian companies that almost exclusively re-export them to Russia.
As a Result, the US Is Now Selling Large Quantities of AI Chips to Countries Previously Ineligible
Following the repeal of FAID, NVIDIA will now send 18,000 AI GPUs (H20) to Saudi Arabia’s state-owned AI company, Humain. This was announced by Jensen Huang at the Saudi-US Investment Forum in Riyadh.
Yet Saudi Arabia was not initially included in FAID’s list of Tier 1 countries.
Saudi Arabia has long harbored ambitions to become a destination for data centers and to build its own domestic AI infrastructure. That was a major reason behind its announcement of plans to invest $1 trillion in the US over the next ten years, in response to Trump’s America First Investment Programme.
A Deeper Paradigm Shift: A Free-for-All Where "Only the Biggest is Beautiful"
At the May Senate hearing, Brad Smith stated that the pressure to innovate must remain intense because “AI is a race that no company or country can win by itself.” He added: “Innovation will only go fast with more infrastructure, faster permitting and more electricians.”
