Washington is taking another look at the route Chinese AI companies use to get their hands on American chips. According to Bloomberg, the US Commerce Department's Bureau of Industry and Security (BIS) is reviewing how Chinese AI firms acquire and access Nvidia chips overseas, following a spate of technological breakthroughs by Chinese labs that has rattled Silicon Valley.

The review is the latest step in a cat-and-mouse game that has defined the AI chip race. In late May, the Commerce Department moved to close a loophole it had created a year earlier: it began requiring licenses for advanced chips — including Nvidia's Blackwell line and AMD's MI350x — destined for Chinese-owned subsidiaries abroad, after reporting suggested hundreds of thousands of such chips may have reached China through offshore routes, including firms based in places like Malaysia. The May move was itself a response to reporting that Chinese companies were buying chips through overseas entities to sidestep export controls.

Beijing, meanwhile, has been pushing in the opposite direction. China's Cyberspace Administration banned domestic tech companies from purchasing Nvidia chips, telling firms such as ByteDance and Alibaba to shift to domestic alternatives — a policy that has accelerated the build-out of China's homegrown AI chip ecosystem even as it deepened the country's dependence on whatever capacity it can create or smuggle.

The stakes are enormous. Export controls are the centerpiece of US strategy to slow China's AI progress, and Nvidia earlier took a $5.5 billion write-off after losing sales to Chinese companies when the curbs took hold. The new BIS review signals that Washington believes gaps remain in the offshore-entity channel — and that the breakthroughs announced by Chinese labs in recent weeks have made closing those gaps more urgent. For Chinese AI firms, the outcome could determine whether the fastest-growing part of their compute supply stays available, or whether the squeeze tightens further.

Sources