Trump is letting China win the chip race

0:00 (clock ticking)- [Narrator] Inside these containers are

0:04 a very important computer chip called the H20.

0:07 It was designed by a company called Nvidia in the US,

0:10 manufactured in Taiwan, then sold to tech companies in China.

0:15 In 2025, China was set to get around 1.3 million H20s.

0:20 When suddenly US President, Donald Trump blocked them, why?

0:24 Because the H20 powers artificial intelligence.

0:27 And right now the US and China are

0:29 locked in an all-out race to dominate artificial intelligence.

0:33 Whoever wins could gain a stronger economy

0:35 and a stronger military than the other.

0:38 Trump wasn't gonna help China get those advantages.

0:41 But three months later, Trump had dinner with NVIDIA's CEO,

0:44 Jensen Huang, and just days later, NVIDIA announced.

0:49 That it will resume sales of its advanced H20 chips into China.

0:52 NVIDIA's H20 chips once banned in China, they will be back in play.

0:57 Jensen Huang played both Washington and Beijing and he won.

1:01 Trump's U-turn on AI chips is shocking.

1:02 If there was anything that you think people could agree on, it

1:05 would be that the most advanced AI technology does not go to China.

1:09 And it could have huge consequences.

1:11 It is very plausible that if we get this policy wrong,

1:14 China could be overtaking the United States.

1:17 So why did Trump change his mind on Nvidia

1:20 chips and what happens when China gets them?

1:23 (upbeat music)- [Announcer] And away they go.

1:38 [Narrator] Let's imagine the AI race is like a car race.

1:41 The US and China are each building the best AI or race car they can.

1:45 They're funding AI research,

1:46 constructing data centers and supporting AI companies.

1:50 At this point, China's car may actually be the faster one,

1:53 but a race car is only as good as its

1:55 engine and an AI's engine is the computer chip.

1:59 It's a tiny slice of silicon packed with billions

2:02 of transistors that turn electric signals on and off,

2:05 bundle hundreds of thousands of chips together and you've

2:08 got the computing power to train and run AI models.

2:12 China's chip makers like Huawei and Cambricon make pretty good AI chips,

2:17 but US chip makers like Nvidia and AMD make much better ones.

2:22 Better chips are what allowed US AI to build a lead in the 2010s.

2:26 But since US chip makers sold chips to China too,

2:29 China was able to hang not far behind.

2:33 [Announcer 2] There has never been a more exciting battle.

2:36 [Narrator] Then around 2018, the US government realized,

2:38 given the stakes of the AI race, it should probably stop helping China.

2:43 AI technology is advancing very quickly and it's

2:45 fast becoming militarily and strategically extremely significant.

2:49 [Narrator] Chris McGuire worked on AI chip

2:51 policy under both presidents Trump and Biden.

2:53 The only area where we have a big advantage over China is in hardware.

2:57 So if we want to be able to slow the Chinese down,

3:00 this is our only way of doing it.

3:02 [Narrator] In 2020, Trump blocked Chinese chip makers

3:04 from using US made tools to make their chips.

3:07 Then in 2022, Joe Biden made it illegal for US

3:10 chip makers to sell their best chips to China.

3:13 With each new chip, US AI surged ahead,

3:17 while Chinese AI was stuck using older US chips or inferior Chinese made chips.

3:23 This was like a boiling the frog effect.

3:25 The amount that it's going to keep China back

3:27 is going to increase every year that they're in effect.

3:29 [Announcer 2] And now starts to pull away.

3:32 [Narrator] These restrictions called export controls change the game,

3:36 but they cost US chip makers a lot of potential business,

3:39 especially for the best chip maker, Nvidia.

3:44 Just 15 years ago, Nvidia was designing chips for video games

3:47 when researchers discovered Nvidia chips were also great for powering AI models.

3:52 The discovery gave Nvidia a headstart on the AI boom.

3:56 By 2023, it made more than 90% of AI data center chips.

4:00 The world wants to run on Nvidia chips,

4:03 and that's because it's so much easier to use NVIDIA than to use anything else.

4:08 [Narrator] Gregory Allen studies AI policy.

4:10 The best chips that are being made by Chinese manufacturing facilities

4:14 are around five years behind that of Nvidia and in fact,

4:19 Chinese military documents, when AI is involved,

4:22 they're asking for Nvidia chips.

4:25 Before Biden's restrictions,

4:26 22% of NVIDIA's revenue came from selling chips to China.

4:30 But after, just 13% did, these restrictions were hurting business.

4:35 So Nvidia found a genius way around them.

4:39 This story's moving pretty fast.

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5:56 Each AI chip is judged by its power and its interconnect speed.

6:01 That's how fast it can talk to other chips.

6:03 In 2022, Biden ban selling any chip above these limits,

6:07 which included NVIDIA's best.

6:09 So Nvidia took its H100 chip and degraded it to create

6:13 a new version that fell under the limits, the H800.

6:17 Chinese AI companies bought as many as they could.

6:20 Then when Biden tightened the restrictions,

6:22 Nvidia designed another new chip, the H20.

6:26 It wasn't powerful, but it was very fast,

6:28 which made it ideal for serving AI models to millions of users.

6:32 Chinese AI companies again bought as many

6:34 as they could and smuggled in some chips.

6:37 By 2025, largely thanks to Nvidia chips, they were showing incredible progress.

6:42 Financial markets have been reacting to Deepseek.

6:45 Deepseek.

6:46 [Speaker] Deepseek.

6:46 [Speaker 2] A company with a collection of Chinese AI models.

6:49 That claims to beat out even open AI.

6:52 And it used Nvidia H800.

6:55 They're catching up quickly.

6:56 We cannot blink at all.

6:58 So the Chinese market is scooping up these chips as fast as they can.

7:03 They're saying whatever the best Nvidia chips we're allowed to buy,

7:06 that's what we want.

7:07 [Narrator] So in April, 2025, the US, this time under Trump again block the H20.

7:12 But instead of making a new chip,

7:14 NVIDIA's CEO went to Trump with a new argument and Trump agreed with him.

7:19 President Trump really understands and really wants and it's

7:23 his policy to have America win the AI race.

7:26 The Trump administration and Nvidia are making

7:29 two main arguments for why it should sell

7:31 chips to China and the first one is that it'll make a lot of money.

7:34 And we have an opportunity to go capture some of that $50 billion.

7:39 It's great for exports, it's great for our treasury.

7:42 That's true, Nvidia stock climbed to a new

7:45 record when Trump reversed the ban and Trump's policy

7:47 that the US will take 15% of chip

7:49 sales could generate billions of dollars for the government.

7:52 But the second argument is a little more counterintuitive.

7:56 You wanna sell the Chinese enough that their developers

7:59 get addicted to the American technology stack.

8:03 He means that selling H20s to China is a trap.

8:05 Let me show you.

8:07 If the NVIDIA H20 is the best chip available,

8:11 then Chinese AI companies will choose to buy it over a Chinese made chip.

8:15 If no one buys Chinese chips,

8:17 Chinese chip makers will struggle to make better ones.

8:20 Then if the US strings China along with better chips,

8:23 eventually Chinese AI will have no choice but to continue using US chips.

8:28 They'll be addicted to them, then as US AI advances,

8:31 it can keep China a few steps behind until the US wins the AI race,

8:36 honestly, seems like a solid plan.

8:39 This is not completely insane.

8:40 We will help Chinese AI companies,

8:43 but we will hurt Chinese semiconductor companies.

8:47 That's the thesis.

8:48 But many experts say there's just one problem with that.

8:51 Trump's plan assumes that the Chinese government will

8:53 let its chip makers fall behind and well.

8:56 There's no chance that's going to happen.

8:59 The Chinese government is pumping billions of dollars into its chip makers,

9:02 mandating that its AI companies use 50% Chinese made chips and its leader,

9:06 Xi Jinping, is demanding it eventually reach self-sufficiency in AI.

9:11 All of that means.

9:12 They're gonna get there eventually, the chips won't be as good as NVIDIA's,

9:16 but they'll go from basically unusable to at least workable.

9:20 And once they cross that threshold,

9:22 they're just gonna get off of Nvidia, they just are.

9:25 [Narrator] That's the flaw in Trump's plan.

9:27 He's not getting China addicted to US chips.

9:29 He's letting China use Nvidia chips to stay

9:32 in the race until its own chip makers can catch up.

9:35 The H20 is a bridge to a future without US chips.

9:39 And once China gets there,

9:41 many experts believe it can pull close or even with the US.

9:45 This is the playbook.

9:46 We should not help them execute their playbook.

9:48 It's just not an America's national security interest.

9:51 [Announcer 2] And it's there that they can pass.

9:53 Look at the courage as they both refuse to back off.

9:58 [Narrator] Yet, Trump is considering letting Nvidia

10:00 sell an even better chip to China.

10:03 The Blackwell, do you know what the Blackwell is?

10:04 The Blackwell is super duper advanced.

10:08 [Narrator] The Blackwell or B30 is 12 times

10:10 more powerful and 11 times faster than the H20.

10:13 They would let China easily catch the US and likely surpass it.

10:18 I think that's absolutely possible.

10:19 Everything else, like I said before,

10:21 is not in our favor and the Chinese might be able to leap frog us.

10:24 [Announcer] Out of the slipstream.

10:26 He's taking the lead, an incredible achievement.

10:30 (upbeat music)- Right now, Trump and China are negotiating a trade deal,

10:36 and it looks like China is angling to get those Blackwell ships.

10:40 China's reportedly banning its AI companies from buying Nvidia

10:44 chips and calling its own chips comparable to the H20.

10:47 This could be the Chinese government pressuring

10:49 its AI companies to use Chinese made chips,

10:52 or it could be a way to pressure Nvidia to pressure

10:55 the Trump administration into letting Nvidia sell Blackwells to China.

10:59 If Trump gives in, expect Chinese AI to get really good, really fast.

11:03 If we start to see models that are as good,

11:06 that are released around the same time as Frontier US models or better,

11:10 that would show they squandered our compute advantage.

11:13 It's a crucial moment in the AI race.

11:15 What the US decides to do right now could

11:18 determine how close it is, maybe who wins it.

11:23 (upbeat music) All right, thanks for watching Search Party.

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