The Commerce Department has begun dismantling parts of the AI Diffusion Rule, calling it a drag on “American innovation” that imposed “burdensome new regulatory requirements” on US companies.
The rollback is set to improve diplomatic ties with countries like the UAE and Saudi Arabia, which were previously treated as second-tier markets and denied chips critical for AI development.
The Bureau of Industry & Security (BIS) will now be tasked with issuing a replacement rule.
Rather than imposing blanket caps on a fixed list of countries, the Trump administration plans to negotiate semiconductor access on a country-by-country basis, determining export levels through bilateral agreements.
The timing of the rule change coincided with President Trump’s visit to the Middle East—just hours later, semiconductor firms including Nvidia and AMD announced major deals to supply high-end chips to Saudi Arabia.
Jeffery Kessler, the US Under Secretary of Commerce for Industry and Security, said: “The Trump Administration will pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries.
“At the same time, we reject the Biden Administration’s attempt to impose its own ill-conceived and counterproductive AI policies on the American people.”
In addition to revising Biden-era chip rules, the BIS intends to strengthen export controls for overseas AI chips, with plans to clamp down on hardware from Huawei.
The agency intends to issue guidance that using Huawei Ascend chips anywhere in the world would violate US export controls.
Huawei has promoted its Ascend processors as an alternative to Nvidia GPUs, which are subject to US export bans.
However, users have reportedly criticised the chips’ poor inter-chip connectivity, while some Huawei employees are said to have raised internal concerns about Cann—the company’s equivalent to Nvidia’s CUDA software platform—citing performance issues.
The BIS also said it plans to introduce tougher penalties for companies found using AI chips to train or run Chinese AI models.
It’s unclear how the new penalties might impact firms working with DeepSeek, the Chinese-developed AI model that shook up the industry earlier this year and is now offered by most major cloud providers.
Chipmakers like Nvidia had attempted to navigate earlier restrictions by designing lower-powered models for the Chinese market, such as the H20. However, those efforts were largely shelved after the Commerce Department required a specific export license for the chip, limiting its commercial viability.
“Today’s actions ensure that the US will remain at the forefront of AI innovation and maintain global AI dominance,” the agency said in a statement.
