Trump scraps Biden's AI chip diffusion rules

Nvidia just scored a massive policy win right as Jensen Huang joined President Trump in Saudi Arabia.

The U.S. Department of Commerce officially rescinded the Biden administration’s Artificial Intelligence Diffusion Rule on Tuesday, just days before it was set to take effect on May 15. The agency instructed staff not to enforce the rule, which aimed to curb how many U.S.-made AI chips could be shipped abroad.

Goodbye tiers, hello one-on-one deals

Introduced in January, Biden’s proposed framework split the globe into three tiers.

Tier 1 nations like Japan and South Korea faced no new limits. Tier 2 regions, including Mexico and Portugal, were slapped with chip export restrictions for the first time. Tier 3 countries like China and Russia faced tightened embargoes.

The DOC pushed back aggressively against that structure, arguing it would have stifled American innovation and damaged diplomatic ties by downgrading dozens of allies to second-tier status. According to Bloomberg, the Trump administration now plans to replace the broad restrictions with direct, country-by-country negotiations.

While broad caps are out, targeted crackdowns remain intact. Alongside the rollback, the DOC warned that using Huawei’s Ascend AI chips anywhere in the world violates U.S. export controls, and cautioned against letting American chips train AI models in China.

Cashing checks in Riyadh

The timing could not be more cinematic. The reversal landed while Nvidia CEO Jensen Huang was spotted alongside Trump in Riyadh at a U.S.-Saudi investment summit, joined by Elon Musk, AMD CEO Lisa Su, OpenAI’s Sam Altman, and Epic CEO Tim Sweeney.

According to The Washington Post, Trump openly told Saudi Crown Prince Mohammed bin Salman that America’s top business leaders were there to walk away with a lot of checks.

For Nvidia, which commands an estimated 90 percent of the AI chip market, the rollback removes an immediate threat to international revenue. Nvidia had previously slammed Biden's rule as misguided and publicly lobbied for a return to Trump-era policies.

Why it matters

This is a decisive shift from institutional regulation to dealmaker diplomacy.

For chipmakers and international tech firms outside the immediate embargo zones, this eliminates an impending bureaucratic nightmare. Cloud builders and enterprise AI teams in countries that were headed for Tier 2 status can now buy hardware without facing sudden export quotas.

We think the move is tactically smart for keeping U.S. chipmakers dominant against rising alternatives like Huawei's Ascend lineup. If American chips become artificially scarce due to blanket export bans, foreign buyers are forced to look elsewhere.

However, switching from clear, written rules to ad-hoc direct negotiations introduces a different kind of risk. Access to critical AI compute now appears directly tied to diplomatic bargaining, meaning supply chains could shift whenever foreign policy takes another turn.