U.S. President Donald Trump's administration has launched a review that could result in the first shipments to China of Nvidia's second-most powerful AI chips, five sources said, making good on his pledge to allow the controversial sales.

Trump this month said he would allow sales of Nvidia's H200 chips to China, with the U.S. government collecting a 25% fee, and that the sales would help keep U.S. firms ahead of Chinese chipmakers by cutting demand for Chinese chips.

The move drew fire from China hawks across the U.S. political spectrum, with concerns that the chips would supercharge Beijing's military and erode the U.S. advantage in artificial intelligence.

But questions have remained about how quickly the U.S. might approve such sales and whether Beijing would allow Chinese firms to purchase the Nvidia chips.

The U.S. Commerce Department, which oversees export policy, has sent license applications for the chip sales to the State, Energy and Defence Departments for review, the sources said on condition of anonymity because the process is not public.

Those agencies have 30 days to weigh in, according to export regulations.

One of the sources, an administration official, emphasised the review would be thorough and "not some perfunctory box we are checking."

But under the regulations, the final decision rests with Trump.

The start of the inter-agency licensing review has not been reported previously. The Commerce Department and Nvidia did not immediately respond to requests for comment.

A White House spokesperson did not comment on the review, but said "the Trump administration is committed to ensuring the dominance of the American tech stack – without compromising on national security.”

BIDEN HAD BANNED ADVANCED AI CHIP SALES TO CHINA

The Biden administration had imposed a raft of restrictions on advanced AI chip sales to China and countries it feared could become conduits for smuggling into the rival nation, citing national security fears.

Trump's move represents a departure from that policy and a dramatic reversal from his first term, when he drew international attention by cracking down on Chinese access to U.S. technology. Back then, he cited claims that Beijing steals American intellectual property and harnesses commercially obtained technology to bolster its military, which Beijing denies.

Exporting large numbers of the chips to China would be "a significant strategic mistake," said Chris McGuire, a former White House National Security Council official under President Joe Biden and senior fellow with the Council on Foreign Relations.

McGuire described the chips as "the one thing holding China back in AI."

"I cannot possibly fathom how the departments of Commerce, State, Energy, and Defence could certify that exporting these chips to China is in the U.S. national security interest,” he said.

Led by White House AI czar David Sacks, several members of the Trump administration now argue that shipping advanced AI chips to China discourages Chinese competitors like Huawei from redoubling efforts to catch up with Nvidia's and AMD's most advanced chip designs.

Reuters reported last week that Nvidia was considering an increase in production of the H200, the immediate predecessor to its current flagship Blackwell chips, after initial orders from China outstripped the current capacity.

While the H200 chips are slower than Nvidia's Blackwell chips on many AI tasks, they remain widely used in industry and have never been allowed for sale in China.

Trump had previously opened the door to sales of a less-advanced version of Nvidia's Blackwell chips, its cutting-edge offering, but backed away from the move and approved sales of the H200 instead.