NVIDIA’s AI chip sale to ByteDance will hinge on the conditions set by the US President Donald Trump’s administration. The administration stated that it is willing to allow China’s ByteDance to buy Nvidia’s H200 chips, though Nvidia has not responded to the proposed conditions governing how the chips would be used once delivered.
What is NVIDIA Up For?
The US declared that it would approve the licence about two weeks ago, but the key sticking point is that Nvidia has not yet accepted the US government’s Know-Your-Customer (KYC) requirement drafted by the US authorities, which was designed to ensure that the chips will not be accessed by China’s military or diverted for prohibited uses. More broadly, Nvidia is still negotiating over the scope and practicality of those safeguards to ship its H200 AI chips to the companies in China. The news from the US administration marks a pivotal shift in chip diplomacy on whether China will be able to receive its first promised chip shipments, with a 25 percent cut to the US government as promised by Trump in early December. The same is applicable to similar chips from firms like Advanced Micro Devices and Intel. Before the chips get exported to China, a US third-party lab is also required to test the chips to ensure that they meet the specifications. This is viewed by many as a way for the US to collect its 25 percent tariff.
Moreover, Nvidia said it is acting as an intermediary between the US government and the potential Chinese customers that would have to comply with the US restrictions. China has already granted preliminary approval for three of its largest tech companies: ByteDance, Tencent, and Alibaba, along with the AI startup DeepSeek, to import the chips. NVIDIA also emphasized that it does not unilaterally accept or reject the terms of the licence. The firm acknowledged the importance of customer vetting but also warned that the conditions must remain commercially workable if the US firms are to compete globally. The executives also cautioned that the overly restrictive and tough regulations could risk accelerating the shift toward non-US chip suppliers.
Markets Watch Closely as AI Chip Policy Remains in Flux
The commerce department typically circulates the licences pending approval to other agencies with the proposed conditions. Once they agree, the licence will be sent to the licence applicant. In this scenario, if Nvidia does not agree with any of the conditions, they can suggest changes. Any suggested changes then will again go back to the government agencies for approval.
The talks now extend beyond ByteDance, as Nvidia is also negotiating licences to ship similar AI processors to other Chinese firms. Various reports outlined that the administration is expected to produce a permit for limited exports of Nvidia and AMD AI chips, once the national security concerns are addressed. For markets, the episode underscores a fragile balance between the national security policy and the commercial realities. With the AI chip export to China remaining a subject of sudden regulatory shifts and political recalibration.
