U.S. Blocks Nvidia Chip Sales to Chinese-Owned Firms Abroad

The U.S. Commerce Department proposed a rule on June 1 that would block Nvidia from selling advanced artificial intelligence chips to Chinese companies through their subsidiaries in third countries, aiming to close a widely exploited loophole in export controls.

The proposed regulation extends licensing requirements to cover sales of Nvidia’s H200 and B200 processors to any entity globally that is more than 25 percent owned by a Chinese parent company. Until now, restrictions have focused on exports directly to China. Chinese firms responded by setting up data centre operations in countries such as Malaysia, Thailand, the United Arab Emirates, and Norway, then ordering chips through those local entities without triggering the same scrutiny.

Commerce officials have been monitoring this pattern for months. A senior department official told reporters that the volume of chips flowing to Chinese-controlled data centres abroad had grown sharply in the first quarter of 2026, effectively undercutting the original export regime put in place in 2022 and tightened repeatedly since. The proposed rule would compel Nvidia and other chipmakers to verify the ultimate ownership of any foreign buyer before completing a sale.

Nvidia did not immediately respond to a request for comment. The company has previously warned that overly broad controls risk pushing international buyers toward domestic alternatives, particularly as Huawei’s Ascend series gains traction (Reuters, 2026a). Wall Street analysts at Morgan Stanley noted that roughly 8 to 10 percent of Nvidia’s data centre revenue is exposed to Chinese-owned customers outside China, though the exact impact depends on how aggressively the rule is enforced.

The public comment period runs for 60 days before the rule can be finalized. If adopted as written, it would represent the broadest extraterritorial reach yet of U.S. semiconductor controls, effectively making the ownership of a data centre as important as its physical location.