US Commerce Secretary Howard Lutnick addressed the Trump administration’s decision to reverse restrictions on Nvidia’s sales of AI chips to China.

Speaking at the Pennsylvania Energy and Innovation Summit on July 15, 2025, Lutnick said that the US aims to allow sales of less advanced Nvidia chips to foster dependence on American technology.

Lutnick mentioned that Nvidia plans to sell its “fourth best” AI chip, the H20, which is less powerful than the top-tier chips used in the US.

He highlighted that the US does not provide China with its highest-performing technology, saying, “We don’t sell them our best stuff, not our second best stuff, not even our third best.”

Following the administration’s approval of export licenses, Nvidia announced it would resume sales of the H20 chip to China.

Lutnick linked this decision to broader US interests, which include maintaining Chinese reliance on American technology and a deal related to rare earth magnets.

The H20 chip, introduced in 2022, was designed to meet export restrictions by limiting certain features, such as the number of GPU cores and bandwidth.

🔗 Source: CNBC

🧠 Food for thought

1️⃣ Nvidia’s dominant market position makes the “get addicted” strategy viable

Lutnick’s approach leverages Nvidia’s extraordinary market dominance, with the company controlling between 70% and 95% of the AI chip market for training and deploying models1.

This dominance has translated into remarkable financial performance, with Nvidia’s market cap reaching $2.7 trillion and the company reporting a tripling in year-over-year sales for three consecutive quarters1.

The strategy recognizes China’s position as the world’s largest semiconductor consumer, which imported $260 billion worth of semiconductors in 2017 and has ambitions to produce more domestically2.

By providing H20 chips—advanced enough to be valuable but not cutting-edge—the administration aims to create technological dependence while maintaining America’s competitive edge in what has become a $500 billion semiconductor industry2.

The approach balances commercial interests with national security, allowing Nvidia potential access to what could have been an $8 billion quarterly market while keeping superior technology exclusively for domestic use.

2️⃣ The technical gap between “fourth best” and leading chips creates strategic leverage