Highlights

• Nvidia receives approval to sell limited AI chips to China in exchange for rare earth magnet trade concessions.
• The U.S. reveals strategic negotiation linking semiconductor exports with critical mineral access.
• Bipartisan lawmakers criticize the move as potentially compromising national technological security.

In a stunning example of how rare earths now sit at the core of global tech diplomacy, U.S. Commerce Secretary Howard Lutnick confirmed that Nvidia’s resumption of AI chip sales to China is tied to ongoing rare earth magnet trade negotiations between Washington and Beijing.

Speaking to Reuters, Lutnick said, “We put that in the trade deal with the magnets,” referring to the Trump-era policy shift to restart Chinese rare earth exports critical to U.S. defense and technology sectors.

Nvidia confirmed Monday that it is filing for licenses to sell its H20 AI chips to Chinese firms, and U.S. officials reportedly assured approvals. The move reverses an April export ban designed to keep powerful AI chips out of Beijing’s hands. While Nvidia’s H20 chips are nerfed versions of their global counterparts, they still run on the company’s proprietary software, an industry standard in AI development.

Key Strategic Threads

• Rare earths as a bargaining chip: The U.S. appears to have softened chip restrictions in exchange for resumed Chinese rare earth exports, particularly NdPr magnets used in EVs, missiles, and drones.
• Political backlash: Bipartisan lawmakers—Republican Rep. John Moolenaar and Democrat Rep. Raja Krishnamoorthi—slammed the move as inconsistent and dangerous, citing national security concerns. Critics fear this trade could undercut the U.S. technological advantage in AI.
• Rare earth dependence underscored: China dominates the global magnet rare earth supply. Its March export freeze has rippled through the U.S. defense industrial base, forcing the White House to negotiate from a position of vulnerability.

Unanswered and Critical Questions for Investors

• What are the terms of the “magnet deal”? Lutnick offered no specifics. Is the U.S. securing long-term magnet exports or a short-term fix to stave off shortages?
• Is this the start of a wider tech-mineral barter system? With the U.S. needing magnets and China needing market access, is this now the baseline for critical mineral trade?
• Does this weaken Western decoupling efforts? Allowing even reduced AI chip exports to China may contradict parallel efforts to re-shore rare earth supply in the U.S. and allied nations.

As global rare earth policy fuses with semiconductor geopolitics, retail investors should watch closely—this chip-for-magnets play may signal a new, transactional era in U.S.-China tech diplomacy.