U.S. Reverses Nvidia AI Export Ban as China’s DeepSeek Closes AI Gap at Fraction of U.S. Costs

Back in April, the U.S. government banned Nvidia’s H20 AI exports to China. As of July 15, the government has reversed its decision. The company is now legally allowed to file for export licenses. This change comes after the crucial London meeting between Chinese and U.S. officials, and following China’s easing of rare earth export controls, upholding their end of the bargain. This news caused Nvidia’s stock to surge 4%. Despite the good news for Nvidia, many are concerned over national security matters, saying the chips could enhance China’s AI military capabilities.

It has been widely assumed that the United States was the leader in global artificial intelligence (AI) technology by far. Private AI companies, which include OpenAI and xAI, have raised tens of billions of dollars in the past year. The future profit engines for companies like Microsoft are built on their ambitious AI strategies. Some of these plans were blown away as China proved that it has AI capabilities close to those of U.S. industry leaders. Moreover, those capabilities came at a fraction of what American companies have invested.

The name of China’s new AI venture is DeepSeek. Training its most recent AI projects costs a tiny fraction of what major Western AI companies need to invest for similar results. Now, China has access to the world’s most powerful AI chips, most of which Nvidia Corp. (NASDAQ: NVDA) makes.

This post was updated on July 17, 2025 to include the government’s decision on AI exports to China.

The Future of AI

Reviewing the latest DeepSeek product, long-time Silicon Valley VC Marc Andreessen posted on X, “Deepseek R1 is one of the most amazing and impressive breakthroughs I’ve ever seen — and as open source, a profound gift to the world.”

This has suddenly upended America’s worldview of the future of AI. If China can build advanced AI models without the world’s most sophisticated chips, the thesis about Nvidia’s market value is flawed. Its market cap, which recently topped $4 trillion and makes it the most valuable company in the world, is much too high.

The DeepSeek news dropped Nvidia’s stock by over 12%. Further proof that China does not need its products can only make that worse. It will also raise another question. Do companies like Microsoft and OpenAI need Nvidia products to keep them at the top of the AI industry?

It is still a matter of debate about whether the DeepSeek software is as good as the best products from industry leaders like OpenAI. However, enough tech industry leaders have posted opinions that DeepSeek has largely closed the AI gap between China and the United States. If that is true, Nvidia’s problems will deepen as DeepSeek continues to get better.

Prediction: Meta Platforms Will Be Worth More Than Nvidia in 2028

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