U.S. Moves to Finalize Rule Blocking Chinese Remote Access to Advanced AI Chips

The U.S. Commerce Department is preparing to finalize a rule that would prevent Chinese artificial intelligence companies from remotely accessing advanced AI chips through data centers located in other countries, according to a report from The Information citing two people familiar with the matter. The move represents a significant expansion of Washington's semiconductor export controls and underscores growing concerns that offshore computing arrangements could undermine existing restrictions on chip sales to China.

The forthcoming rule, which could be announced as early as this month, would extend the Bureau of Industry and Security's current semiconductor-related controls to seven additional countries, including Malaysia, Singapore and Thailand. These Southeast Asian nations have emerged as key hubs for data center capacity in recent years, and U.S. officials are concerned that Chinese firms could exploit offshore facilities in these jurisdictions to circumvent domestic chip access restrictions. The measure specifically targets both remote access to advanced chips and the smuggling of semiconductors into China.

The regulatory push comes amid heightened scrutiny of Nvidia's potential links to China. The chipmaker's CEO, Jensen Huang, recently acknowledged an affair with a woman suspected of being a Beijing spy, a disclosure that has intensified political pressure in Washington over the company's China exposure. Chinese internet giants including Tencent, Alibaba and ByteDance have all signed offshore data center agreements granting them access to Nvidia's top-tier chips for training their artificial intelligence models. However, these arrangements are facing increasing scrutiny both abroad and within China, particularly as Beijing pushes for greater adoption of domestic semiconductor alternatives.

The Commerce Department is consulting with other government agencies before the rule can be finalized, according to the report. The development follows separate reporting from Axios on Wednesday that U.S. President Donald Trump had pushed for tighter export controls against China to prevent illegal chip smuggling, though Commerce Secretary Howard Lutnick was a major opponent of the measure. The news rattled markets, with Nvidia shares falling 6.86%, while Hong Kong-listed shares of Tencent dropped 2.64% and Alibaba declined 4.85%.

The proposed rule signals a broadening of the U.S. technology containment strategy beyond direct chip sales to encompass the global data center infrastructure that enables Chinese firms to train frontier AI models. If finalized, the measure could reshape the economics of offshore computing for Chinese technology companies and force them to accelerate reliance on domestic chip alternatives, while also raising compliance burdens for data center operators across Southeast Asia. The outcome of the internal debate between the White House and the Commerce Department will be closely watched by semiconductor manufacturers, cloud providers and investors across global markets.