US approves Nvidia chip sales to Chinese firms with military ties

The new export arrangement

The US Commerce Department recently authorized Nvidia to sell H200 processors to around two dozen Chinese companies. This decision represents a reversal of previous restrictions that aimed to block Beijing from obtaining advanced chips capable of boosting military power. Under the new rules, the government seeks to balance economic interests with national security concerns.

The deal includes specific logistical requirements for the hardware. Any H200 units produced in Taiwan are required to transit through American territory before they can be delivered to the Chinese buyers. This allows the government to maintain a level of oversight on the physical movement of the technology across borders.

Financial terms are also a key part of the agreement. The US government will collect a 25% tariff on the value of these processors. This move ensures that while the trade is permitted, it remains subject to significant federal revenue and oversight mechanisms.

Major tech and military links

The list of approved buyers includes several prominent technology giants. Reportedly, major businesses such as Baidu, BYD, and Tesla Shanghai received the green light. Other significant names on the list include Alibaba, Tencent, ByteDance, and ZTE Kangxun Telecom.

However, the investigation found that some approved companies have deep ties to military suppliers. For example, Zhejiang Yindun Cloud Technology is linked to a group that provides cloud services to military contractors. This group also supports a satellite program operated by the defense bureau of China’s Hebei province.

Another approved entity, Shanghai Jiatang, originates from a state-owned telecom firm. This company supplies technology to the Chinese military and operates under an academy involved in military cryptography. These connections have raised questions about whether current export controls can effectively prevent restricted organizations from obtaining advanced hardware.

Concerns over shell companies

Reporters investigating the approved firms discovered some troubling details about the companies involved. One firm, New Matrix, was established only about 17 months ago. When reporters visited its registered office in an industrial park outside Beijing, they found an apparently vacant space with no records in the building directory.

Corporate records for New Matrix also linked its owners to a private equity fund that the US blacklisted in 2024. That fund was accused of helping China acquire strategically important semiconductor businesses. Analysts suggested that New Matrix could be connected to other companies associated with that blacklisted fund.

Similar issues were found with a company called Maginfra, which also appeared to have a vacant registered office. Analysts noted that Maginfra shared personnel and patents with Inspur, a firm previously placed on the US Entity List. Both companies also have connections to government ownership, raising further questions about the transparency of the approval process.

Government and corporate response

The Bureau of Industry and Security defended its screening process as a careful examination of applications for national security risks. To bolster oversight, the agency reported hiring more than 90 enforcement officers in 2026. It also noted imposing $324 million in penalties for export violations during 2025.

Despite these efforts, some officials remain skeptical about the depth of the background checks. Liza Tobin, who previously served as a China director for the White House National Security Council, questioned if the government and Nvidia were doing enough. She expressed concerns about whether companies are properly following the specific licensing requirements set by the government.

Nvidia has defended its sales by suggesting that the Chinese military has little reason to rely on American technology. The company noted that Beijing has restricted H200 imports to encourage the use of local processors. Furthermore, Nvidia stated that H200 shipments to China-based customers represented a fraction of its data center revenue, totaling less than 1% in the quarter ending in July.

Future legislative hurdles

The debate over these exports continues to create friction in Washington. In December 2025, a bipartisan group of US senators proposed new legislation. This proposal aims to stop the administration from easing rules on advanced AI chip exports to China and other countries for two and a half years.

The investigation also highlighted how Chinese AI companies are finding workarounds to access American hardware. Many firms are increasingly exploring access to advanced processors through overseas data centers, particularly in Southeast Asia. US officials have warned that these foreign companies and infrastructures could be used to bypass American export restrictions.

While the current arrangement allows for trade, the underlying tension remains a primary focus for policymakers. The government must navigate the risk of providing high-end tools to potential rivals while maintaining a competitive edge in the global market. The outcome of the proposed bipartisan legislation will be a key indicator of the next steps for US trade policy.