US shuts ‘secret backdoor’ that may have allowed Chinese companies to use Nvidia's top AI chips

The US government has rushed to close a major security loophole that accidentally allowed Chinese tech firms to use the world’s most powerful artificial intelligence chips for nearly a year, a report has said. The US Department of Commerce issued a guidance on Sunday (May 31), shutting down a ‘secret backdoor’ that may have let foreign subsidiaries of Chinese companies bypass strict American trade bans, as er a report by news agency Reuters.For the past year, the US has tried to block China from accessing Nvidia’s semiconductors needed to build advanced military and commercial AI. However, the report says, this newly-uncovered loophole allowed Chinese companies to simply use their overseas branches – based in countries like Malaysia – to buy top-tier hardware without needing a special government license.The trade opening is said to have been originally created back in May 2025, when the Trump administration announced it would not enforce an “AI Diffusion” security rule left behind by the outgoing Biden administration. By leaving that door open, the US allowed overseas branches of Chinese companies to freely purchase the absolute crown jewels of American tech, including Nvidia’s Blackwell and Rubin processors, alongside AMD’s powerhouse MI350x chips.Exactly how many powerful chips successfully slipped through the cracks remains unknown, but industry insiders warn the damage is already done, the report said.Under the strict new rules, the US Commerce Department will now enforce heavy licensing requirements on any tech purchase made by a company headquartered in China – no matter where in the world that branch is physically located.While the policy is a massive step to stop future leaks, the US government included a twist: the new rules do not force international data centres to stop using the chips they already bought. Furthermore, American tech companies are still allowed to service and maintain the advanced servers and computing systems that Chinese subsidiaries set up over the last year.