Washington DC - In a sudden change of policy, President Donald Trump's administration on Tuesday opened the door for NVIDIA to sell advanced AI chips to China.

The change would permit the tech giant to sell its powerful H200 chip to Chinese buyers if certain conditions are met, including proof of "sufficient" US supply, while sales of its most advanced processors would still be blocked.

However, uncertainty has grown over how much demand there will be from Chinese companies, as Beijing has reportedly encouraged tech companies to use homegrown chips.

Chinese officials have informed some firms they would only approve buying H200 chips under specific circumstances, such as for development labs or university research, the Information reported Tuesday.

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The Information had previously reported that Chinese officials were calling on companies to pause H200 purchases while they deliberated requiring them to buy a certain ratio of AI chips from Nvidia's rivals in China.

In an update on Tuesday, the US Commerce Department's Bureau of Industry and Security said that it had changed the licensing review policy for H200 and similar chips.

Trump announced in December an agreement with Chinese President Xi Jinping to allow NVIDIA to export its H200 chips to China, with the US government getting a 25% cut of such sales.

The move marked a significant shift in US export policy for advanced AI chips, which former President Joe Biden's administration had heavily restricted over national security concerns about their use by China's military.

NVIDIA CEO Jensen Huang has long advocated for the company to be allowed to sell some of its more advanced chips in China, arguing the importance of AI systems around the world being built on US technology.

The chips, which largely take the form of graphical processing units or GPUs, are used to train the AI models that have become the bedrock of the generative AI revolution.

The GPU sector is dominated by NVIDIA, now the world's most valuable company thanks to frenzied global demand.

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H200s are roughly 18 months behind the US company's most state-of-the-art offerings, which will still be off-limits to China.

Huang has repeatedly warned that China is just "nanoseconds behind" the US as it accelerates the development of domestically produced AI chips.

On Wednesday, leading Chinese AI startup Zhipu said it had used homegrown Huawei chips to train its new image generator.

Zhipu AI described its tool as "the first state-of-the-art multimodal model to complete the entire training process on a domestically produced chip."