The US Department of Commerce has moved to close a potential loophole that may have allowed Chinese firms to export advanced AI chips to subsidiaries based outside China.
The guidance, posted on the Commerce Department's website, suggests that US AI chips may have been making their way to Chinese AI firms in Malaysia and other countries despite broader US efforts to restrict semiconductor exports.
It is unclear how many chips have been exported, but one industry source estimated it was in the hundreds of thousands.
The Commerce Department created the loophole when it announced in May 2025 that it would not enforce the AI Diffusion rule, which governed global access to AI chips.
Technology expert Chris McGuire called the loophole a 'HUGE problem' and said it allowed Chinese companies to buy Nvidia Blackwell chips without a license.
The new guidance does not require data centers to stop using the chips or cut off servicing of advanced computing items.
