• The US Department of Commerce issued new guidance to curtail AI chip exports to Chinese firms located abroad.
• This action addresses a loophole that allowed Chinese subsidiaries to acquire advanced Nvidia and AMD chips.
• Experts estimate hundreds of thousands of chips may have been exported over the past year.
• The updated rules impose licensing requirements even on shipments to Chinese companies outside mainland China.
• No changes are required for data centers currently using the chips or for servicing them.

The U.S. Department of Commerce has announced new guidance that aims to close a loophole allowing the export of advanced AI chips, specifically Nvidia's Blackwell processors and AMD's MI350x, to Chinese firms located outside of China. This development indicates that U.S. AI chips may have reached subsidiaries of Chinese AI companies, such as those based in Malaysia, despite existing restrictions on supplying critical technologies to China, according to Reuters and South China Morning Post.

The unexpected guidance was issued following the recognition of a potential loophole that had persisted for nearly a year. Estimates suggest that hundreds of thousands of chips may have been exported during this period. The guidance mandates the enforcement of license requirements for advanced chip exports to entities headquartered in China, even when these entities operate outside of China, as reported by Channel News Asia and Reuters.

Chris McGuire, a former State Department official and technology expert, expressed his concern over the loophole, stating, "This is a HUGE problem," and indicated that Chinese firms were likely procuring these chips at scale. Following the new guidance, it appears that the loophole allowing purchases without licenses has been closed; however, another issue remains regarding the lack of due diligence required from foundries like TSMC in Taiwan regarding production for Chinese front companies, according to Channel News Asia and South China Morning Post.

Interestingly, the guidance does not require data centers to cease using or servicing the chips, which could maintain the existing supply chain despite the regulatory changes. Both Nvidia and AMD have not provided immediate comments on the situation, emphasizing that the regulatory landscape remains complex and subject to further adjustments, according to Reuters.