A (3:08)

Chips are made here, it is actually unconstitutional to tax the export of those chips. There may be a loophole if they're made and packaged elsewhere, but they're. That's neither here nor there. All part of the.

C (3:21)

No, the reaction. The reaction is, is outside of video and its fans and friends and lobbyists seems to be pretty resoundingly negative. Although, of course, from the GOP side on the Hill, the condemnations are fairly muted because they're afraid of President Trump and upsetting him. But, you know, this is, this is not the Blackwell or the half Blackwell, the B30A that had been discussed before and was almost given to the Chinese ahead of the Busan meeting. But this is still a very powerful chip, much more powerful than anything the Chinese cav or will have for the next several years. It works not only for inference, but also for trading. So it's a much, much more important chip for the Chinese side. The question then, of course, and it's the big debate we've had on multiple podcasts and with Ben and Ben's written about in, you know, now we get to see is, you know, did the Chinese will they buy it? Is it was the rejection of the H20 just a ploy to get a better chip? Or are they?

A (4:24)

And if so, that appears to have.

C (4:25)

Worked right out very well.

A (4:27)

The H200 is apparently six times better than the H20. And as you said, it is critical for training and could be very useful to Chinese companies and potentially the Chinese military in the course of training models.

C (4:45)

Does inference. But the Chinese have, you know, they're starting to have good enough ish inference chips, but training is still where there's a big hole. And so this.

A (4:54)

So is there any good argument for selling these chips to China right now? And I ask because honestly, I personally don't think the US should be selling these chips to China. But in the interest of keeping the show balanced, I would love to present a strong counterargument, but I'm really not sure what the strategic upside for the United States is beyond upside for Nvidia in the course of all.

C (5:20)

So, I mean, going back to the president's statement on true social, I mean, that was just full of not, you know, inaccurate information about American jobs. Right. So that, that, of course, is, you.

A (5:29)

Know, so strike that.

C (5:30)

His potential, his pitch. But that is really BS in terms of, I think what you've been hearing from the Nvidia side and some of Its boosters is, you know, you want to keep China effectively addicted to the video ecosystem, to the chips, and to.

A (5:44)

Cuda, to the software.

C (5:45)

Yeah, that's bs and that is another variant of the China fantasy. But that is, I think, something that was enough to convince the President.

A (5:54)

Yeah.

C (5:54)

That along with probably the ballroom donation and whatever else is going on, was enough to sway President Trump. And again, this goes back to the. Just start the conversation. The process is. There is no process. Mm. Right there. There is no national security process anymore. And so it's a, it's, it's a target rich environment for rich, powerful companies who have good lobbyists and as the case in the case of Jensen Huang, direct access to the President.

A (6:21)

Yeah, it's pretty depressing to consider. This is the CEO of the most valuable company in America and the President of the United States basically working in tandem to sell these chips to China for no clear benefit beyond potentially Nvidia's stock price. Like the idea of keeping China bound to the American AI stack and keeping China bound to the CUDA ecosystem. That argument made more sense three or four years ago, but it seems like the horse has left the barn on some of those fronts. And now I just, I mean, part of what I would highlight, and I'm familiar with this because of hosting Sharp Tech, there's already more demand for Nvidia chips than the company can supply. So everything they make gets sold. And unless I'm missing something, selling these chips into China will come at the expense of chips that would be sold to American buyers for reasons that aren't entirely.

C (7:22)

It's probably not a coincidence that Nvidia killed the Gain AI act last week, which would have. Which would have required certification that chips being sold to certain countries like China were not affecting sales to the supply of chips to US Firms that wanted them. And so, you know, Nvidia was very skillfully worked the Hill to get that kill.

A (7:44)

And honestly, the Gain AI act, it was alive for longer than I would have expected. And there was bipartisan.

C (7:51)

Well, eventually the President came out against it and then, you know, and then the, the.

C (7:58)

Most of the GOP supporters on the Hill all just cave because no one wants to go against the President.

A (8:02)

Yeah. But it didn't die instantly. And I think the fact that there was continued support for it is an indication that people in D.C. are taking these issues seriously, even if the President of the United States is not taking it seriously.

C (8:17)

But it doesn't matter because the President made the decision. And so now, you know, now the question. And again, it goes back to that debate we had many months is do the Chinese buy these? And it seems like the Chinese, the Financial Times had a story saying that they might buy some, but it'll be limited. It does seem like though that the Chinese again, are, you know, the two track approach, which is building up their indigenous semiconductor AI chip ecosystem as fast as possible, but more than happy to selectively buy US Chips that fill massive gaps. And one of the big gaps is training. Now we have to remember, right, that you know, the big Chinese hyperscalers, they still have access to the best AI chips in the cloud offshore. That loophole was never closed again. That was. The lobbyists made sure it wasn't closed in the Biden administration and certainly not going to be closed in the Trump administration and certainly not going to be closed given the US has effectively unilaterally disarmed, frozen anything countermeasures.

A (9:18)

Yeah, well, and it's interesting because that was included in the story that the Financial Times ran and it was interesting. I was curious how they got access to the purported decision making that's happening in Beijing. Apparently a decision has not yet been made on how many chips companies are going to be allowed to buy, how many H2 hundreds companies are going to be allowed to buy, how that process will work. They have mooted a potential licensing system where companies will have to apply for, for a permit to buy H2 hundreds and explain why domestic chips can't satisfy their AI needs. And so all that is being worked out probably as we speak here. But the note on, you know, Alibaba, ByteDance and Tencent using cloud solutions to train their models was interesting because it's like now I wonder, well, so who would be using the H200 domestically on the mainland to train their models? Is it strictly the defense industrial complex in China? I don't really know.

C (10:28)

I don't know.

A (10:29)

Questions are raised by this week's news.

C (10:31)

And the decision to grant these licenses. Is there anything on the US Side that prevents them being sold for sort of dual use, military use?

A (10:38)

Yeah, like the Chinese monitoring that Nvidia could agree to. Like they fought for years like the.

C (10:43)

Chinese have with rare earth magnets sales to the U.S. unclear. I mean it is, it is just amazing. Leaving aside, like to your earlier question about was there, is there a. Can you make a good argument, make an argument or convincing argument why this is a good idea? The fact is the US this was just a unilateral gift to the to Nvidia and the Chinese side. The US is not the Trump. They're not getting anything for this.

B (11:08)

All right, and that is the end of the free preview. If you'd like to hear the rest of today's conversation and get access to full episodes of Sharp China each week, you can go to your Show Notes and subscribe to either Bill's newsletter, Cynicism, or the Stratechary Bundle, which includes several other podcasts from me and daily writing from my friend Ben Thompson. I'm an incredibly biased news consumer, so I think both are indispensable resources, but either way, Bill and I are going to be here every week talking all things China, and we would love to have you on board. So check out your Show Notes, subscribe, and we will talk to you soon.