The Trump administration has formally scrapped the ‘AI Diffusion Rule’ put in place under former President Joe Biden. The decision was announced on Tuesday (May 13) by the US Department of Commerce. This move effectively halts the rollout of a major export control regulation that was set to take effect just two days later – on May 15, 2025.
The Biden-era rule was first unveiled in January 2025. It aimed to impose strict limitations on the export of advanced US-manufactured semiconductors and technologies used in artificial intelligence (AI) systems to adversarial nations (particularly China). The regulation was framed in such a way that it divided countries into 3 categories, each with varying levels of access to AI chips depending on their security standing and relationship with the United States.
The rule targeted high-performance AI chips, especially those developed by leading US firms like Nvidia and AMD. The intent was to restrict their distribution to countries deemed high-risk, while still allowing controlled exports to close allies. It also aimed to tighten existing export rules (Export Administration Regulations) by requiring more licenses for shipments to many countries. However, the rule quickly attracted strong backlash from key US allies and major tech companies. Firms like Nvidia and Oracle expressed concerns that it would severely limit international business and harm America’s competitive edge in the global AI sector.
Considering the backlash and ongoing diplomatic concerns, there were rumours that the rule might be delayed or changed. However, the Commerce Department has now taken the more aggressive step of canceling enforcement altogether. Even internal instructions were reportedly given to suspend all preparations for its implementation.
According to a report by Bloomberg, citing sources familiar with the matter, the Trump administration now plans to replace the rule with a more flexible approach. Rather than imposing blanket restrictions, the new strategy may involve negotiating individual agreements with countries (or a deal-by-deal strategy). These deals would be customized to specific national interests and security considerations, potentially offering more freedom to allies.
The decision to scrap the AI diffusion rule comes shortly after the US and China agreed to temporarily halt the imposition of new tariffs on each other’s products for 90 days to allow more time for trade talks.
Meanwhile, speaking in Riyadh on May 13, David Sacks (the White House’s AI and cryptocurrency official) highlighted that the diffusion rule was never intended to target strategic partners like Saudi Arabia. The policy reversal also coincides with President Trump’s announcement of over $600 billion in US-Saudi investment deals, including a collaboration between Nvidia and Saudi-backed AI firm Humain to establish AI facilities powered by US chips. Notably, earlier this year, President Trump launched the ‘Stargate’ initiative – a joint venture with SoftBank, OpenAI, Oracle, and others – to invest up to $500 billion in US AI infrastructure.
