• Trump administration plans to rescind Biden’s AI chip export regulations.
• “Simpler rules” to free American innovation and maintain control over technology.

According to a Reuters report, the Department of Commerce confirmed on Wednesday that the administration plans to “rescind and modify” the Framework for Artificial Intelligence Diffusion rule introduced in the final days of the Biden presidency.

Under the Biden administration’s Framework for Artificial Intelligence Diffusion, the global technology market was to be stratified: allies would have enjoyed unlimited access to cutting-edge AI chip export regulations and technology, and a second tier of nations would have faced quotas limiting their adoption capabilities. A final group would have been shut out from accessing the technology of the AI revolution.

The three-tier system was scheduled to take effect on May 15, but in a policy reversal, the Trump administration is about to rescind the regulations; a shift in how the US approaches AI development, national security, and international technology trade.

“The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation,” a Commerce Department spokeswoman told Reuters. “We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.”

The Biden administration’s approach, finalised just one week before Trump took office, represented the culmination of a four-year effort to restrict China’s access to the latest chips that could enhance its military capabilities and maintain US leadership in AI technology.

Three-tier system faces elimination

The first tier under the now defunct rule included 17 countries plus Taiwan, which would have received unlimited chips; a second tier of approximately 120 countries would have faced caps on the number of chips they could import; and a third tier comprising “countries of concern” including China, Russia, Iran, and North Korea, would have been blocked entirely from trade in powerful silicon.

Instead of the tiered approach, Trump administration officials are considering replacing it with a global licensing regime backed by government-to-government agreements, according to sources cited by Reuters last week.

Bloomberg News reported similarly, noting that the changes are taking shape as President Trump prepares for a trip to the Middle East, where countries including Saudi Arabia and the United Arab Emirates have expressed frustration over restrictions on their ability to acquire AI chips.

The Commerce Department’s decision could be announced as soon as today (May 8, 2025), according to one source familiar with the matter.

Impact on chip manufacturers

The news has already made waves in financial markets. Reuters reported that shares of Nvidia ended 3% higher on May 7, 2025, following the announcement, though they dipped 0.7% in after-hours trading.

Nvidia, the dominant manufacturer of chips used for training AI models, has consistently opposed the growing number of US restrictions. CEO Jensen Huang recently argued that US companies should be able to sell into China, which he predicts will become a $50 billion market for AI chips in the next couple of years.

Despite the potential relaxation of some export controls, the Trump administration has not softened its stance on China specifically. It has already banned Nvidia from selling its H20 chip in China, a move that cost the company $5.5 billion in writedowns, according to Bloomberg.

Global implications

The repeal would provide temporary relief for countries like India and Malaysia, which hadn’t faced chip restrictions before the Biden rule was unveiled in January. For Malaysia specifically, the delay could benefit Oracle, which has plans for a massive data centre expansion that would have exceeded the limits established by US AI trade rules.

Middle Eastern nations could also see new opportunities. The UAE and Saudi Arabia, which have faced chip export controls since 2023, may be able to negotiate better terms with the new administration.

Trump has expressed interest in easing restrictions for the UAE and could announce the beginning of work on a government-to-government AI chip agreement during his upcoming visit to the region from May 13 to 16.

The UAE has been particularly active in pushing for such an accord and has pledged to invest up to $1.4 trillion in US technology and infrastructure over the next decade.

What comes next

According to Axios, the Trump administration is working currently on a new control scheme, which could take the form of an executive order. This leaves companies like Nvidia without short-term certainty about future regulations.

The administration has indicated that it will continue to enforce existing chip export curbs and develop a new regulatory framework. One element of the new approach may be to impose controls on countries that divert chips to China, including Malaysia and Thailand, according to one source familiar with the matter.

While chip manufacturers have lobbied against strict export controls, AI companies like Anthropic have advocated for maintaining protections that safeguard US intellectual property and technological advantages.

Balancing innovation and security

The Biden administration’s export caps were part of a broader strategy to limit access to chips needed for cutting-edge AI development, with a particular focus on preventing Chinese firms from finding backdoor access to technology that existing export controls prevent them from importing directly.

Creating a balanced approach presents significant challenges. Striking agreements with a range of countries eager to purchase advanced AI chips would be a monumental task that could result in dozens of separate policies that companies would need to navigate.

The Commerce Department has not provided a specific timeline for when any new rules would be finalised and implemented, but indicated that debate is still underway on the best course of action.

The shift in AI chip export regulations reflects the Trump administration’s approach to technology policy, emphasising American competitiveness and innovation and maintaining control over important technologies that have national security implications.

As the administration works to craft its replacement framework, the global AI chip market remains in a state of flux, with significant implications for technological development, international relations, and corporate strategies.