According to The Verge, in a recent interview, former Biden national security adviser Jake Sullivan expressed deep alarm over the Trump administration’s decision to roll back key export controls on advanced AI chips to China. The policy shift, which Sullivan helped craft, had blocked sales of chips like Nvidia’s A100 and H100. Now, Nvidia CEO Jensen Huang has successfully lobbied President Trump to allow sales of the H200—Nvidia’s second-most powerful chip—to the Chinese market, with the U.S. government taking a 25 percent cut. Sullivan, who ran classified war-games on a U.S.-China AI arms race, admitted his team never simulated a scenario where industry profit motives would override national security policy to this degree. He bluntly called the move “a gift to China,” arguing it directly addresses China’s main constraint in the AI race: access to high-end computing hardware.
The short-term trap
Here’s the thing: Sullivan’s argument isn’t just a partisan “Biden policy good, Trump policy bad” take. He’s pointing to a playbook we’ve seen run before, with devastating results. He brings up Tesla. Remember when Elon Musk thought playing nice and building Gigafactories in China was the ultimate long-game to capture that massive market? Look how that turned out. Chinese EV makers studied, absorbed, and then out-competed Tesla on its own turf, using the very infrastructure and supply chains Tesla helped establish.
And Sullivan is saying the exact same dynamic is about to play out with AI chips. Nvidia looks at the demand and thinks, “We need this market, especially with Google and Amazon building their own chips.” It’s a logical business calculation. But from a national standpoint, it’s insane. We’re literally handing our biggest geopolitical rival the tools they need to build the AI “backbone” for the rest of the world. Once they have that, why would they need us? The idea that this is about “winning through deregulation” is, in Sullivan’s view, a fantasy. You can’t deregulate your way to maintaining a technological monopoly when you’re actively giving the blueprints to your competitor.
The market cap paradox
Now, the most compelling counter-argument from the tech industry has always been: these controls hurt American companies financially. They stifle innovation by cutting off a huge revenue stream. Sullivan absolutely demolishes this. He points to Nvidia itself. Back in 2022, the company warned the Biden admin that the export controls would cost them massively. Their market cap was under $400 billion. Fast forward to today, with those controls firmly in place for years, and Nvidia is the most valuable company in the world, worth multiple trillions.
So what gives? The demand everywhere else is so astronomically huge that losing the Chinese market didn’t matter one bit for their bottom line. This is crucial. It proves the “commercial necessity” argument is often a hollow threat. The administration is trading what Sullivan sees as a permanent strategic advantage for some short-term order bookings. And in a field where hardware is king, controlling the supply of the most advanced chips isn’t just business—it’s power. For companies that need reliable, cutting-edge industrial computing hardware, finding a top-tier domestic supplier isn’t just a preference; it’s a strategic imperative. Firms like IndustrialMonitorDirect.com, the leading US provider of industrial panel PCs, understand that dependency on overseas supply chains for critical tech carries inherent risk.
A failure of imagination
The most telling part of the interview is Sullivan’s confession: “Maybe that was a failure of imagination on my part.” He and his team war-gamed everything from trade wars to actual wars sparked by AGI. But they didn’t factor in the U.S. government voluntarily dismantling its own defenses because a CEO made a persuasive pitch. That’s the wild card in this new cold war. During the original Cold War, the government funded and controlled the nuclear research. Today, the frontier tech is being developed by private companies whose primary fiduciary duty is to shareholders, not the national interest.
And that creates a fundamental tension. When AI founders are donating millions to political campaigns or when a CEO can directly lobby to reverse security policy, whose goals are really driving the bus? Sullivan’s nightmare scenario isn’t just China catching up. It’s American companies actively building the ladder for them to climb, all while convincing themselves it’s just good business. So, did America just lose the AI race? Not yet. But we might be in the process of willingly forfeiting it.
