US formally approves Nvidia H200 chip exports to China: What conditions are in place?

The Trump administration has formally approved the Nvidia H200 chip exports to China. But, the approval of sale comes with certain conditions as announced by the Department of Commerce.

Previously the sale of Nvidia’s second most powerful AI chips was blocked by the US government on the grounds of China’s surging dominance in tech industry and military, which would give Beijing edge over Washington.

Last month, US President Donald Trump gave a green light to chip sales to “approved customers” in China in return for a 25 percent fee.

The recent approval has also implemented some conditions for the chip exports.

Third-party verification

According to the regulation, every H200 shipment will be reviewed by an independent third party testing lab, aiming to ensure the chips' technical capabilities before leaving the US.

50 percent supply cap

To prioritize US domestic demand, there would be a 50 percent supply cap. Chinese customers cannot receive more than 50 percent of the total volume of chips sold to American customers.

Inventory certification

Nvidia will be obliged to certify that there is adequate inventory of H200 within the US to meet with domestic demand.

Security procedures

Chinese customers would exhibit "sufficient security procedures” to ensure that they will not use the chips for military purposes.

Nvidia has welcomed the formal approval of chip exports and issued a statement, “President Donald Trump strikes a thoughtful balance that is great for America" and will help the company compete in the global chip market.”

These restrictions come on the heels of China’s surging orders for H200 chips. As reported by Reuters last month, Chinese tech firms have placed orders for more than 2 million, surpassing Nvidia’s inventory of 700,000 of the chips.

Analysts’ opinions on rules

According to Jay Goldberg, an equities analyst with Seaport Research, the caps on exports would be difficult to enforce.

"As we have seen, (Chinese) companies have found ways to get access to those chips, and the U.S. government appears highly transactional in their approach to chip exports.”

Saif Khan, who served as director of technology and national security on the White House National Security Council under former President Joe Biden, said the rule would enhance China's AI capabilities.

"The rule would allow about two million advanced AI chips like the H200 to China, an amount equal to the compute owned today by a typical U.S. frontier AI company,” he said.

He continued, “The Administration will also face challenges enforcing the rule's know-your-customer requirements that restrict Chinese cloud providers from supporting nefarious uses.”

China’s reaction to approval

The Chinese embassy in Washington has not yet responded to the recent move. However, it remains still vague whether the Chinese government would allow the domestic tech companies to buy these chips.