Nvidia’s resumption of H20 chip sales related to rare earth element trade talks

Rare earth elements appear to be behind Nvidia’s stance on China. 

After announcing in June plans to essentially withdraw from the Chinese market, the semiconductor chip and AI giant reversed course and said it was filing an application to restart sales of its H20 AI chip to China.

U.S. Commerce Secretary Howard Lutnick said Tuesday that Nvidia’s plans to start selling its H20 AI chips are tied to ongoing trade discussions with China regarding rare earth elements, according to reporting from Reuters. AMD plans to restart sales of its MI308 AI chip in China too.

Rare earth elements (REE) like lanthanum and cerium, and which are largely mined in China, are necessary components in technology, including rechargeable batteries for electric vehicles. These REEs have become a critical point in the current trade debates between the U.S. and China. 

Not everyone is happy with this trade development though. 

The decision “would not only hand our foreign adversaries our most advanced technologies, but is also dangerously inconsistent with this administration’s previously-stated position on export controls for China,” Congressman Raja Krishnamoorthi, said in a statement, according to Reuters. 

But Lutnick isn’t concerned and told CNBC on Tuesday that China is only getting Nvidia’s “fourth best” chip. 

“We don’t sell them our best stuff, not our second best stuff, not even our third best,” Lutnick said in the interview. 

This news comes less than a week after it was rumored that Nvidia would be designing and releasing a new AI chip specifically for the Chinese market to resume business in the country without violating U.S. chip export rules. 

The U.S. is still trying to figure out what its AI chip export rules are going to look like. The Trump administration formally rescinded the Biden administration’s AI Diffusion Rule in May and there hasn’t been a formal update since. 

The Trump administration was rumored to be considering further restrictions on AI chip exports to countries like Thailand and Malaysia, to prevent smuggling, Bloomberg reported last week. Malaysia implemented trade permits on U.S. made AI chips on Monday.

TechCrunch reached out to Nvidia for comment.