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Nvidia investors are breathing a sigh of relief after the Trump administration scrapped the implementation of a controversial Biden-era rule on AI chip exports. Just how long they should exhale, though, remains up for debate. The policy in question, introduced in the waning days of former President Joe Biden ‘s term, would have established a three-tiered system for regulating the exports of high-powered artificial intelligence chips. Often called the “AI diffusion rule,” it represented a broadening of the Biden administration’s yearslong effort to curtail China’s access to advanced semiconductors over national security concerns. It had been set to take effect May 15. “The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation,” a Commerce Department spokesperson said Wednesday in a statement to CNBC’s Kif Leswing. “We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.” When the AI diffusion rule was first announced, Jim Cramer blasted it as “absurd.” Nvidia also has been critical of the policy — and on Tuesday, CEO Jensen Huang used public comments to warn about the risks of American companies being unable to compete in the Chinese AI market. In a statement Wednesday to CNBC’s Kristina Partsinevelos, a spokesperson for Nvidia said the chipmaker welcomed the Trump administration’s “leadership and new direction on AI policy.” The AI diffusion rule crafted by the Biden administration divided the world into three groups, with varying levels of access to the cutting-edge AI chips made by Nvidia and rivals such as Advanced Micro Devices . The overarching goal was to try to limit the potential for advanced AI chips to be rerouted into China from other nations. The first tier consisted of 18 U.S. allies, including Japan and Germany, that would have generally been exempt, enabling them to obtain AI chips in a business-as-usual manner. A second, much larger group of tier two nations, such as Israel, would have essentially capped the amount of AI chips they could import without securing a license from the U.S. government. Then, in the third tier were China, Russia and other countries subject to U.S. arms embargoes, which would have remained subject to strict export controls previously put in place by the Biden administration, first in 2022 and then toughened in 2023. President Donald Trump has kept those Biden-era export controls, which forced the likes of Club name Nvidia and AMD to design throttled-back versions of their most capable products for the Chinese market. However, last month, the Trump administration made them even more restrictive, telling companies that those made-for-China chips were now too powerful to be shipped without a license. Consequently, Nvidia on April 15 said it would book a $5.5 billion inventory charge , and AMD said Tuesday it expected a $1.5 billion revenue hit this year. That change in policy from the Trump administration was a clear setback for Nvidia and to a lesser extent AMD, which we exited at higher prices at the end of December. The decision to scrap the AI diffusion rule, on the other hand, is a helpful one in the short run — reflected by Nvidia’s 3% pop in the final hour of trading Wednesday. Shares opened higher Thursday but then drifted modestly lower in a stronger broader market on U.S.-United Kingdom trade news. Nevertheless, some on Wall Street are still wondering what the Trump administration has in mind to replace the Biden AI diffusion policy. That cohort includes analysts at Bernstein. They told clients on Thursday the news certainly removes a short-term overhang on AI chipmakers, but added they “suspect we have not heard the last of this.” Analysts at Deutsche Bank struck a similar tone. “While this news is a welcome relief to AI-related semi names in the near term, as the complexity of the AI Diffusion rule is removed, we still believe the U.S. government’s overriding goal to restrict access to AI semi’s remains unchanged,” Deutsche Bank analysts wrote to their clients late Wednesday. In late April, Reuters reported that one option being considered by the Trump administration was replacing the tiers with government-to-government agreements — an idea the Bernstein analysts argued would potentially be worse than the Biden policy because it figures to be time-consuming and could result in AI chip access being used as a tool in the Trump team’s trade negotiations over tariffs. “Other (better) options could conceivably involve reducing the number of countries/markets classified as ‘Tier-2’ to focus on the ones where back-door China access is a relevant concern, while leaving allied countries more free to purchase,” Bernstein wrote. Another potential risk for Nvidia is the Trump administration’s so-called sectoral tariffs focusing on semiconductors and other electronics. The Commerce Department last month said it opened a national security probe into those industries, a precursor for Trump to impose targeted duties under a 1960s trade law. Nvidia pledged on April 14 to produce up to $500 billion in AI infrastructure in the U.S. over the next four years — an initiative that could help soften the blow of any potential sectoral tariffs on chips and AI servers used in data centers. The bottom line is Nvidia has found itself in an increasingly precarious geopolitical position during Trump’s second White House stint because of escalating U.S.-China trade tensions — and it’s why Jim recommended in mid-April that investors should book some profits in the once red-hot AI stock. Overall, sentiment on Wall Street since then has improved, buoyed by hopes of trade deals and tariff relief. Plus, the recent earnings reports from the largest U.S. tech firms dispelled another fear lingering over Nvidia’s stock — revealing concerns that Big Tech would curtail its AI massive spending got a bit ahead of itself. Still, the geopolitical ground that Nvidia is walking on has not yet fully stabilized. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Nvidia CEO Jensen Huang speaks alongside unseen US President Donald Trump about investing in America, at the White House in Washington, DC, on April 30, 2025.
Jim Watson | AFP | Getty Images
Nvidia investors are breathing a sigh of relief after the Trump administration scrapped the implementation of a controversial Biden-era rule on AI chip exports. Just how long they should exhale, though, remains up for debate.
