Nvidia GPU Crackdown Hits China-Linked Southeast Asia Data Centers

“Chinese firms' overseas subsidiaries had previously exploited the ambiguity in the rules, procuring Nvidia's Blackwell-architecture chips in full compliance and without any export licenses. The new guidance will tighten the regulatory grip and raise compliance costs and legal risks for these companies,” says a Liaoning-based columnist using the pen name“Little Chunping.”

“But enforcement remains challenging. Proving that an overseas chip buyer is ultimately Chinese-owned is far harder than it sounds. Corporate structures can span multiple jurisdictions, and foreign governments are under no obligation to help Washington trace them,” he says.

He adds that possible countermeasures include deploying more intermediaries and financial instruments to obscure transaction chains, shifting toward technology licensing or purchasing cloud computing services that bundle access to advanced chips, and establishing more substantive research and production partnerships in less regulated jurisdictions to gain indirect access to the technology.

“Do not be fooled by the word 'clarification.' In export control language, a clarification often hits harder than a new rule. BIS has now made explicit that any entity whose ultimate parent is headquartered in China or Macau needs an export license, regardless of whether it is registered in Singapore, Malaysia, the Middle East or anywhere else,” says a Tianjin-based writer using the pseudonym“Ling Gen.”

“This is less about discovering a loophole and more about admitting one was created,” he says.“Washington's own regulatory zigzagging over the past year opened a grey channel for these chips to flow through. Now the political narrative needs to reframe that policy mismanagement as an urgent national security gap that must be plugged.”

He says the move works like a slow squeeze with two immediate consequences:

. Existing chips in data center racks are untouched, but every future purchase order becomes a license application stuck in permanent review. AI companies may be able to cope with existing stockpiles for now, but will hit a bottleneck when upgrading to more powerful next-generation models.

. Projects already mid-stream face immediate uncertainty. The guidance covers future exports but says nothing about chips already at sea or orders signed but not yet shipped. With no transition period offered, contracts are left in legal limbo and suppliers have already begun to hit the brakes. Affected data centers may pivot to Nvidia's H200 chips, which remain outside the scope of the current restrictions.

When Donald Trump returned to the White House in January 2025, one of his early moves in the technology arena was to shelve the AI Diffusion Rule, a sweeping export control framework that the Biden administration had pushed through in its final days in office.

The rule would have imposed tiered restrictions on the worldwide export of advanced AI chips, dividing countries into three categories based on their perceived security risk to the US and capping the total volume of chips that could be shipped to most destinations. Its suspension left a regulatory vacuum that Chinese firms were quick to exploit.

Last July, media reports indicated that Washington was planning to tighten export controls on Nvidia's AI chips, specifically targeting Malaysia and Thailand, to prevent Chinese firms from using them to train AI models. But the May 31 guidance could only be launched a full year after the loophole was created.

“The reason they had to issue this statement is that BIS's non-enforcement of certain export controls has potentially inadvertently allowed Chinese companies to both buy Nvidia Blackwell chips and make AI chips at TSMC, all legally and without a license,” Chris McGuire, a former US State Department official specializing in technology and national security, says in a social media post on June 1.“This is a huge problem.”

He adds:“This statement does not say that BIS will enforce the parts of US regulations requiring TSMC to do enhanced due diligence on AI chip orders. This is a massive loophole that still needs to be closed. If Chinese companies can make chips at TSMC, including by using third-country cutouts to receive them, there is no point to restricting China's access to AI chips or advanced chip-making tools.”

McGuire says BIS created the problem by announcing it would stop enforcing certain regulations without clearly stating which rules were affected or updating its policies to reflect what it was still enforcing. He says the resulting confusion left companies and regulators uncertain about what was and was not permitted, opening gaps that some firms were quick to exploit.