U.S. Loosens Chip Trade Curbs on China, Easing Tech Tensions

In a move signaling tactical détente, the U.S. government has authorized Nvidia to resume shipments of its H20 artificial intelligence chips to Chinese firms. The decision marks a shift in Washington’s export policy, as American officials balance commercial interests with national security concerns.

Commerce Secretary Howard Lutnick confirmed the change, framing it as part of a broader trade arrangement tied to the resumption of Chinese rare-earth exports to the U.S. The gesture aims to de-escalate tensions that have rattled supply chains and tech markets since the imposition of chip export controls.

Chips for Rare Earths: A Quiet Truce

The pivot stems from months of behind-the-scenes negotiations. China agreed to restart exports of rare-earth materials vital to U.S. tech and defense industries. In return, Washington is loosening some restrictions on the sale of legacy AI hardware and design software.

Nvidia, which had faced the risk of losing up to $15 billion in Chinese revenue, is now preparing to ramp up exports of its H20 chips—a downclocked version of its flagship AI processors. Though technically limited, the H20 remains highly competitive due to its compatibility with Nvidia’s AI software stack.

Chinese firms like ByteDance and Tencent are reportedly lining up orders. And while U.S. officials insist high-end models remain restricted, Nvidia executives are optimistic that licensing pathways will eventually open for more advanced chips, depending on evolving policy.

Market Reaction: A Relief Rally

The market responded quickly. Shares of Nvidia (NASDAQ: NVDA) rose over 4%, while AMD (NASDAQ: AMD) jumped 7% on renewed hopes for cross-border chip sales. EDA software providers like Synopsys (NASDAQ: SNPS) and Cadence Design Systems (NASDAQ: CDNS), which had quietly resumed exports in recent weeks, also saw a modest bump.

The rally reflects optimism that access to the massive Chinese AI market—though partial—will bolster earnings in the second half of the year. Investors are now recalibrating expectations as the geopolitical landscape shows signs of softening.

Washington’s Balancing Act

U.S. officials have been careful to frame the shift not as a concession, but as a calibrated strategy to keep China reliant on American technology. By allowing sales of capped AI chips and legacy software tools, Washington aims to limit Beijing’s ability to develop cutting-edge models while preserving U.S. leverage.

Still, lawmakers on both sides of the aisle are watching closely. Any perception of backtracking on tech restrictions could trigger political backlash. Proposals for stricter export license controls and “geofencing” technology—limiting how exported chips are used—are already circulating on Capitol Hill.

Geopolitical Implications

This temporary thaw may ease trade tensions, but it doesn’t erase the underlying rivalry. As China and the U.S. navigate a precarious relationship, the semiconductor industry remains a central battleground. The latest developments show both sides are willing to strike short-term deals—but long-term decoupling pressures persist.

For now, traders and tech firms are taking the win. Whether this opening proves durable or fleeting will depend on how the political winds shift in Washington and Beijing.

Tips for Traders

• Watch Nvidia (NASDAQ: NVDA) – Eased restrictions could boost revenue from China, particularly in the AI segment.

• Track AMD (NASDAQ: AMD) – Gains from policy spillovers are likely if broader access continues.

• Keep an eye on EDA players – Synopsys (NASDAQ: SNPS) and Cadence (NASDAQ: CDNS) may benefit from resumed China flows.

• Monitor geopolitical headlines – Any reversal or new restrictions will impact chip sector volatility.

• Evaluate rare-earth exposure – Firms reliant on rare-earth imports could see improved input costs if supply stabilizes.

• Expect margin expansion – Partial access to Chinese demand may support near-term upside in chipmakers’ guidance.