U.S. Commerce Secretary Howard Lutnick told Nvidia it "must live with" strict licensing terms for H200 AI chip sales to China during a congressional hearing on Tuesday. The detailed conditions, negotiated with the State Department, include Know-Your-Customer requirements to prevent military use.
The H200 represents Nvidia's second-most-advanced AI processor cleared for Chinese export under a trade truce brokered by Presidents Trump and Xi Jinping in October 2025. That agreement included a U.S. pledge to postpone technology shipment restrictions to Chinese firms by one year.
Despite January 2026 authorization, Nvidia has not fully agreed to proposed conditions according to Reuters reporting. The chipmaker faces rigorous verification protocols for end-users including ByteDance, Alibaba, Tencent, and DeepSeek.
"They help us and instruct us and we follow their lead," he told lawmakers.
Lutnick deferred questions about Chinese compliance to President Trump, stating the "complex relationship" between the two countries is managed at the highest levels.
The Commerce Department's Bureau of Industry and Security now reviews H200 export license applications on a case-by-case basis. Approved customers must demonstrate shipments won't reduce global semiconductor capacity available to U.S. allies.
China has historically been one of Nvidia's largest markets, but repeated export controls have cost the company an estimated $8 billion in potential sales. The H200 clearance offers limited market access with added compliance costs and political risk.
House Select Committee on China Chairman John Moolenaar raised concerns in a January 28 letter about Nvidia's technical assistance to Chinese AI firm DeepSeek. He alleged resulting models were later used by China's military.
The White House imposed a 25% tariff on certain advanced computing chips including the H200 and AMD's MI325X in January 2026. That tariff excludes chips imported to support U.S. infrastructure buildout.
Senator Elizabeth Warren urged the Commerce Department in April 2025 to block AI chip exports to China amid reports of a "backroom deal" with Nvidia. She warned continued H20 exports would result in "more data centers for the PRC, less for the United States."
Nvidia's Blackwell chips, now in use by U.S. customers, are reportedly 10 times faster than H200 chips for some tasks. The company's upcoming Rubin architecture remains excluded from Chinese export approvals.
Commerce Department officials view advanced AI hardware as a national security asset comparable to critical minerals. Lutnick connected chip policy to broader strategic concerns about mineral weaponization during his testimony.
The licensing framework requires Chinese buyers to work with China's National Development and Reform Commission on additional stipulations. This reflects Beijing's own cautious approach to the controlled technology transfers.
Nvidia has not publicly commented on Lutnick's statements or its acceptance of the licensing terms. The company previously halted H20 GPU exports, resulting in a $5.5 billion quarterly charge.
Chinese domestic AI chip companies including Huawei Technologies and Cambricon have gained traction amid U.S. restrictions. Huawei's Ascend 910C GPU series represents China's push for Nvidia alternatives despite being "a generation behind in chips."
The H200 situation presents a high-stakes balancing act between commercial interests and national security. U.S. officials remain wary of potential military applications for AI training and inference infrastructure.
Lutnick's message underscores the Trump administration's determination to enforce strict end-use controls. Licensing terms are non-negotiable with ultimate authority resting with the president and national security officials.
