Nvidia will not be able to sell its customized AI chips in China. Both the company and the markets have been caught by surprise. The chips have been turned into a bargaining point. Export controls are ineffective since it stimulates the domestic supply chain.

Of course, China desperately needs AI chips. Export controls could hold back China in the AI race, Access to chips and computing power has been at the core of Silicon Valley’s lead over China in AI but that gap is closing fast. Chip restrictions are porous. These are ineffective without international co-operation.

China is not far behind in AI software and DeepSeek has proved it. America’s key lead now remains in hardware, and that too in advanced chips. Huawei and Semiconductor Manufacturing International Corp are working to produce domestic alternative to Nvidia’s processors. Even the local players are catching up.

Chip war has pre-dated the trade war. The US may lose both. These chips should not have been used as pawns.