The unceremonious fading out of Donald Trump’s trade war left the world in shock. In an effort to preserve the prestige of the American empire, Trump is now positioning the United States’ most advanced semiconductors as leverage in the ongoing geopolitical struggle with China.

Full-Scale Suppression of Chinese AI

Two weeks ago, Trump repealed the Biden administration’s AI Diffusion Rule, which had divided the world into three tiers based on access to US chips：
• Unlimited chip access for a dozen closest U.S. allies;
• Rationed access for approximately 120 second-tier nations;
• Total embargo on countries including China, Russia, Iran, and North Korea (tier three).

Trump decided to scrap Biden’s three-tiered approach, aiming to use chips as key leverage in bilateral talks.

China took the first hit—not a surprising one, but more explicit than Biden would ever publicly admit, no matter how badly he might want to. Under Trump, the U.S. Bureau of Industry and Security (BIS) unveiled new guidelines that overtly target China:
• An “alert” declaring that using advanced Chinese chips – specifically naming Huawei Ascend 910B, 910C, and 910D – without a U.S. license violates export controls;
• Public warnings on risks of allowing U.S. AI chips to train or run Chinese AI models;
• Guidance to fortify supply chains against Chinese “diversion tactics” via third countries.

Since taking office, crushing China’s AI sector has been Trump’s top priority. In April, his administration notified NVIDIA that even its downgraded H20 chip (previously approved for China) now requires an export license.

Why is Huawei’s Ascend chip facing such aggression?

The Ascend 910C delivers 91% of NVIDIA H100’s performance at one-third the price. This “near-peer capability at half the cost” fueled Ascent’s capture of 35% of China’s AI chip market in 2024, trailing only NVIDIA (45%). Globally, Ascend is gaining rapid traction across the Global South：
• Saudi Arabia and UAE deploy Ascend in smart city projects;
• Huawei partners with cloud providers in Turkey and Brazil for Ascend-powered AI platforms.

Thus, Trump races to preempt Chinese AI chips and open-source models by entrenching the U.S. technology stack – a complete ecosystem spanning from hardware to software – across the geopolitical “middle ground.” The goal: ensuring global AI runs on U.S. chips, U.S. software, and U.S. cloud platforms.

The Middle East: A Proxy Battleground for U.S. and China

Middle Eastern sovereign wealth funds are making substantial investments in the AI revolution.

According to the Sovereign Wealth Fund Institute (SWFI), technology investments by Middle Eastern sovereign wealth funds, such as Saudi Arabia’s Public Investment Fund (PIF), have risen from 8% of their portfolios in 2015 to over 30% in recent years, reflecting a strategic shift away from oil dependence.

This shift has unintentionally turned the Middle East into a proxy battleground for U.S. and Chinese technological dominance.

Huawei has already established four data centers in Saudi Arabia, including a $17 billion supercomputing center in NEOM powered by Huawei Ascend 910C chip. The company also unveiled AceGPT, an Arabic-language AI model. Earlier this year, Tencent entered the Middle Eastern cloud market, setting up its first data center in Riyadh.

Meanwhile, the UAE has launched the Condor Galaxy project featuring Nvidia H200 clusters, released the open-source Falcon 2 model, and signed data-sharing agreements with Gulf nations.

Through investments in AI chips and computing infrastructure, Middle Eastern countries are reshaping the region’s geopolitical dynamics, leveraging AI to assert their influence.

In May, the U.S. signed a $600 billion investment agreement with Saudi Arabia, which includes a significant partnership involving Nvidia and the Saudi Public Investment Fund to support the AI company HUMAIN. Over the next five years, HUMAIN will purchase hundreds of thousands of Nvidia’s advanced AI chips. The UAE has also announced collaborations with OpenAI, Oracle, Nvidia, and others under the Stargate UAE initiative.

These moves represent Trump’s opening salvo in his campaign to contain China’s AI advancements. The administration appears poised to extend this strategy to Southeast Asia and Latin America, targeting regions where it can establish dominance.

Trump’s Huawei ban has had an impact. On May 19, the Malaysian government announced plans to collaborate with Huawei on Southeast Asia’s first sovereign AI project using Ascend chips. However, within 24 hours, the announcement and related posts were swiftly removed, likely due to U.S. pressure.

Internal Policy Directions in the U.S. and China

The U.S. remains divided on its internal policy direction. The recent chip deals with the Middle East have sparked backlash from domestic critics, primarily concerned about the potential for these chips to end up in China.

The U.S. faces a dilemma: hawks worry about advanced technologies flowing to China, while tech giants fear losing a lucrative market. Nvidia CEO Jensen Huang has increasingly voiced opposition to restrictions on chip exports to China, warning that the Chinese AI market could reach $50 billion within two to three years and that losing access to it would be a “massive loss.”

On the Chinese side, U.S. pressure is accelerating efforts to build a fully self-reliant AI ecosystem. Optimists see this as an opportunity for China’s domestic semiconductor industry to grow. Major Chinese tech companies have ramped up purchases of domestic alternatives like Huawei Ascend chips and are adapting their software ecosystems to support these products.

They also argue that U.S. bans on Huawei chips and Chinese AI models are unenforceable, as the U.S. lacks the capacity to police global compliance effectively. As long as Chinese products are strong enough, some will still find a way to break through the U.S. blockade.

As the challenger, China approaches the competition unburdened, like a marathon runner chasing the leader without hesitation. Meanwhile, the U.S., as the frontrunner, must constantly monitor the challenger to maintain its lead—an energy-intensive position when there is no clear gap in capability.

For the world, a positive externality from U.S.-China AI competition could emerge in the form of high-quality, affordable products that benefit everyone. However, America’s current strategy of forcing nations to pick sides is likely to face resistance.

Editor: huyueyue