The Trump administration is preparing to restrict shipments of advanced AI chips — including those from Nvidia Corp. — to Malaysia and Thailand, as part of a broader effort to prevent U.S. semiconductor technology from being illicitly funneled into China.
A draft rule from the Commerce Department would tighten controls to block China, which already faces an effective U.S. ban on Nvidia’s high-end AI processors, from acquiring those chips through intermediaries in Southeast Asia, according to people familiar with the matter. The proposed regulation is still under review and subject to change, said the individuals, who requested anonymity to discuss private deliberations.
Officials reportedly plan to pair these new restrictions on Malaysia and Thailand with a formal rollback of the global AI diffusion rule introduced at the end of President Joe Biden’s term. That rule sparked pushback from U.S. allies and major tech companies, including Nvidia. Still, the U.S. will keep in place targeted export curbs on China — first implemented in 2022 and expanded several times since — as well as restrictions on more than 40 countries named in a 2023 measure designed to combat smuggling and increase oversight of critical markets.
The proposed rule would be the first concrete action in Trump’s promised revamp of Biden’s AI export control framework. While the Commerce Department said in May that it would replace Biden’s approach with a “bold, inclusive strategy,” sources said the new draft falls short of a full replacement. Notably, it leaves unanswered key questions — including whether U.S. chips can be safely used in overseas data centers, especially in sensitive regions like the Middle East.
It also remains unclear if the U.S. will eventually expand controls beyond Malaysia and Thailand.
The Commerce Department declined to comment. The agency has revealed few details publicly, aside from Secretary Howard Lutnick’s recent testimony: “The US will allow our allies to buy AI chips, provided they’re run by an approved American data center operator, and the cloud that touches that data center is an approved American operator.”
Nvidia, which dominates the AI chip market, also declined to comment. Thai and Malaysian officials didn’t respond to Bloomberg’s requests. Nvidia CEO Jensen Huang has previously said there’s “no evidence” of AI chip diversion, though his remarks weren’t directed at any specific country.
Thailand said earlier it is awaiting further details, while Malaysia’s Ministry of Investment, Trade and Industry emphasized the need for “clear and consistent policies” to support the tech industry.
The question of which countries should be allowed to import U.S. AI chips — and under what conditions — has been debated in Washington for years. On one side, there’s a desire to enable global AI development with American hardware before Chinese alternatives become viable. On the other, there’s concern that exported semiconductors could end up in China, or be accessed by Chinese AI firms through foreign data centers.
Southeast Asia has become a particular focus. Oracle Corp. and other companies are investing heavily in Malaysian data centers, and trade data shows a recent spike in chip shipments to the region. While Malaysian authorities have pledged to monitor imports closely, the new draft rule signals that U.S. officials remain wary.
Chip exports to Malaysia are also at the center of a criminal case in Singapore, where three individuals have been charged with deceiving customers about the final destination of AI servers. Those servers, initially shipped to Malaysia, may have contained advanced Nvidia processors. (Nvidia is not implicated in the case and faces no accusations of wrongdoing.)
To soften the impact on companies with operations in the region, the U.S. plans to include several transitional provisions in the upcoming rule. Firms based in the U.S. or in allied nations would be allowed to continue shipments to Malaysia and Thailand without a license for a limited period after the rule is issued, sources said.
Additionally, license requirements would include exemptions aimed at minimizing disruptions to global supply chains. Many semiconductor firms rely on Southeast Asian facilities for key manufacturing steps, including chip packaging — the process of encasing semiconductors for use in electronic devices.
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