Trump’s All-Important AI Chip War Decision Looms Over His Presidency, Nvidia And The World – Investors
President Trump said of his just-signed U.S.-China trade deal almost exactly five years ago.
The biggest deal anybody has ever seen,
It turned out to be a nothingburger. Yet that same boast would be an understatement for the TikTok-for-Trump tariffs deal that he’s put on the table to open his second presidency.
Though TikTok is the immediate prize eyed by Trump, Oracle (ORCL), Microsoft (MSFT) and others, it’s a shiny bauble diverting attention from the elephant in the room: the profound fracturing of U.S.-China relations that came as President Biden launched an all-out effort to block China’s technological advancement. Even Trump tariffs are a sideshow.
Whether Trump aggressively counteracts Beijing’s artificial intelligence ambitions — by leaning into export controls denying China access to artificial intelligence-enabling chips and chipmaking equipment — will likely be the most consequential decision of his second term.
Be forewarned: If the dealmaker-in-chief doesn’t strike a monumental U.S.-China deal, get ready for Trump, Cold War commander in chief, overseeing a no-holds-barred battle for AI supremacy. Which of the two distinct paths Trump chooses will have major implications for Nvidia (NVDA), Meta Platforms (META), all the other Magnificent Seven stocks and, of course, Taiwan Semiconductor (TSM), which makes the chips on which America’s AI leadership depends.
U.S.-China ‘Grand Bargain’
Trump’s election victory may have revived the possibility of a U.S.-China “grand bargain,” Chinese stock ETF specialist KraneShares observed recently. The firm highlighted a series of postelection signals that Trump is taking a “conciliatory, ‘Art of the Deal’ approach to China.” They include Trump talking himself down to a new 10% tariff on Chinese imports, after threatening 60% during the campaign.
But then came DeepSeek’s “wake-up call,” as Trump put it, sowing doubt about U.S. leadership in AI. In the first hint that Trump might assume a more contentious posture, Bloomberg News reported that his administration may restrict exports of Nvidia’s older H20 chips, which DeepSeek credits with helping its AI chatbot match wits with OpenAI’s ChatGPT at a fraction of the cost.
TikTok For Tariffs — Or AI Chips
As the clock ticks down to Trump’s April 5 deadline for avoiding a TikTok ban, another clock is ticking. “The largest salvo in the new technology cold war” is set to hit May 15, say SemiAnalysis founder Dylan Patel and co-authors. That’s 120 days after the departing Biden administration put forth a sweeping rule to turn less-than-effective curbs on the sale of advanced AI chips to China into an impermeable web.
The TikTok deal framework Trump has sketched out — the U.S. will go easy on new tariffs if President Xi Jinping agrees to cede control of ByteDance’s U.S. operations — only scratches the surface of what’s really on the table. U.S. chip export controls will ultimately be key to any significant deal. Before signing off on a TikTok sale, Xi will want to know if Trump intends to move ahead with Biden’s dramatic escalation of AI chip export restrictions to block China from rivaling — if not overtaking — the U.S.
DeepSeek’s Deep Impact
As Trump pledges to make sure the U.S. is “the world capital of artificial intelligence,” it suddenly seems possible that the capital could wind up, not in Silicon Valley, but in Hangzhou, home to both DeepSeek and tech giant Alibaba (BABA).
DeepSeek’s economical approach has fueled concern about whether U.S. companies’ massive AI infrastructure investments will pay off, triggering the Jan. 27 sell-off that cut Nvidia’s market value by nearly $600 billion. Two days later, Alibaba unveiled its own new AI model, claiming to outperform Meta, OpenAI, Anthropic and DeepSeek across a range of industry benchmarks.
China’s growing AI prowess was behind the heavy-handed global licensing regime advanced by the Biden administration in its final week. The Framework for Artificial Intelligence Diffusion aims to deny China the massive computational resources needed to build the most advanced AI models, which might be used to optimize the military tactics in real-time or power hard-to-deter cyberattacks.
“The government believes that AI (will) determine whether U.S. hegemony persists or if it is ceded to China” and that the outcome will hinge on whether sufficient steps are taken “over the next few years” to disrupt China’s progress, SemiAnalysis said in a Jan. 15 analysis.
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Trump’s All-Important AI Chip War Decision Looms Over His Presidency, Nvidia And The World – Investors, Source
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