A significant change in US technology policy is set to tighten control over the global flow of advanced AI chips. The US government has moved to close a loophole that reportedly allowed Chinese companies to access some of the world’s most advanced artificial intelligence processors through overseas subsidiaries.
The US Department of Commerce issued new guidance on May 31, introducing stricter regulations aimed at preventing Chinese firms from bypassing existing trade restrictions. The move follows concerns that subsidiaries of Chinese companies located in countries such as Malaysia were able to purchase high-end AI chips without requiring a special US government licence.
The loophole reportedly emerged in May 2025 after the Trump administration decided not to enforce the “AI Diffusion” security rule introduced by the previous administration. This decision created a pathway through which overseas branches of Chinese companies could legally acquire advanced semiconductors.
As a result, some of the industry’s most powerful AI processors, including Nvidia’s Blackwell and Rubin chips as well as AMD’s MI350X processors, were reportedly accessible through foreign subsidiaries. The exact number of chips obtained through this route remains unknown.
Under the updated rules, any company headquartered in China will now be subject to licensing requirements when purchasing advanced US technology, regardless of where its subsidiary operates. The new measures are designed to prevent future circumvention of export controls and strengthen restrictions on AI-related technology transfers.
However, the policy does not require international data centres to stop using advanced chips that were previously acquired. In addition, US technology companies will still be permitted to provide maintenance and support services for AI systems and servers already deployed by Chinese subsidiaries.
The latest action reflects Washington’s ongoing efforts to restrict China’s access to advanced semiconductor technology that could support both commercial and military AI development.
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