Nvidia (NASDAQ:NVDA) stock is taking a hit Friday as a U.S. government decision to permit the chip giant to resume sales of its H20 AI chips to China faces strong opposition from House Select Committee on China Chairman John Moolenaar.

This move, seen by some as a boost to China’s AI ambitions, comes amid broader national security concerns that are also delaying a multi-billion dollar AI chip deal between the U.S. and the United Arab Emirates, highlighting the increasingly complex geopolitical landscape impacting the semiconductor industry.

Moolenaar warned Commerce Secretary Howard Lutnick that the move could boost China’s AI capabilities and help its firms gain global market share, Reuters reported on Friday.

Also Read: Nvidia’s Jensen Huang Says China Leads In Open-Source AI

In a letter sent Friday, Moolenaar criticized the reversal of the April export ban, which aimed to keep cutting-edge U.S. AI chips out of Chinese hands due to national security risks.

Nvidia confirmed earlier this week that the U.S. government had authorized renewed H20 chip sales to China. The chipmaker called the product a significant revenue source.

Lutnick stated Tuesday that the H20 chip decision was linked to ongoing negotiations with China over rare earths and magnets.

The Select Committee’s April report noted that Nvidia’s H20 chips were key in enabling a surprising AI model developed by China’s DeepSeek. Moolenaar also cited Tencent’s (OTC:TCEHY) use of H20s to train large-scale AI systems.

Concerns and Delays in the UAE Deal

Beyond the China sales, Nvidia is facing additional scrutiny due to national security concerns that are holding up a significant chip deal with the United Arab Emirates (UAE). This deal, which would enable the UAE to acquire billions of dollars’ worth of Nvidia AI chips, is facing pushback from some Trump administration officials. Their primary apprehension is that Chinese firms could gain indirect access to this advanced technology through the agreement, the Wall Street Journal reported on Wednesday.

Although President Trump had endorsed the deal during a May visit to the Middle East, the terms have yet to be finalized. A key sticking point is G42, an Abu Dhabi-based AI firm slated to receive approximately 20% of the chips. U.S. officials are concerned that G42, due to its historical ties and collaborations with Chinese entities, could serve as a conduit for China to obtain restricted semiconductors.

For the time being, the Commerce Department intends to block shipments to G42, despite Secretary Lutnick’s public expression of confidence in the deal’s future. Analysts say this internal disagreement, amid fears that Huawei could fill the vacuum, highlights how export controls on AI chips have become a geopolitical flashpoint.

While some officials, like White House AI czar David Sacks, advocate for proceeding with the UAE agreement to maintain U.S. leadership in the global AI race, others are pushing for stricter restrictions before moving forward. The prevailing lack of clarity regarding chip limits and export rules continues to fuel broader uncertainty across the entire semiconductor industry.

NVDA Price Action: NVDA stock is trading lower by 0.51% to $172.10 at last check Friday.

Read Next:

• Semiconductor Stocks React To Key Policies And Earnings

Image via Shutterstock