Towards the end of last week, the spokesperson of the US Department of Commerce announced that the rules governing the export of microchips promulgated in the last days of the Biden administration were cancelled. This was welcome news for more than 150 countries, Israel among them, and the product of a pressure campaign by a combination of forces that don’t generally join hands: chips giant Nvidia, the main loser from the move, and countries that matter to President Donald Trump, such as Saudi Arabia and the UAE, which felt discriminated against despite their special relations with the US.
Saudi Arabia in particular plans a large server farm to process AI at an investment of $5 billion and with an output of 1.5 gigawatts. Imports of graphics processors is therefore a strategic necessity for it. The trade agreement that may be signed between the US and Saudi Arabia is likely to settle this matter too. According to a report on the Bloomberg website, the UAE, where Group G42 Holding, an artificial intelligence development holding company controlled by Tahnoun bin Zayed Al Nahyan is based, has also received undertakings from Trump on relaxations of the restrictions, and is expected to enter into talks with the US administration on chip imports.
It may be that the Trump administration’s responsiveness to pressures from the UAE and Saudi Arabia is connected to the fact that they are large financial investors in Japanese investment company Softbank, which has joined Trump, Oracle CTO and executive chairman Larry Ellison, and OpenAI CEO Sam Altman in the construction of a server farm for AI processing in the US in the coming years. Ellison will also benefit from the temporary lifting of the restrictions on chip exports to Malaysia, where Oracle intends to build a large server farm at an investment of $6.5 billion.
Allies too
The restrictions in Biden’s AI Diffusion Act were published before Trump’s trade tariffs were announced, and had no connection with them. Under the regulations published in mid-January, countries were divided into three tiers. The bottom tier, consisting of countries such as China, Russia, Syria, North Korea and Sudan, was subject to an almost complete ban on the sale of graphics processors from the US. The top tier, consisting of eighteen countries such as the UK, France, Canada, Japan, and Australia, was exempt from all restrictions. In the middle were about 150 countries subject to restrictions on the export of graphics processors. These countries, among them India, the UAE, Saudi Arabia, Singapore, Poland, Switzerland, and Israel, have in common that they do not regulate exports to China and allow Chinese investment in critical infrastructure.
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How will US graphics chips restrictions affect Israel?
Under the original regulations, the quantity of chips that Nvidia could export to Israel was limited to 50,000 over three years, between 2025 and 2028. Moreover, the US semiconductor giants were compelled to calculate the number of graphics processors transferred between countries in order not to violate any of the regulations, such as the prohibition on more than 7% of the AI computing power of a “Universal Validated End User” (essentially a company based in a top tier country) being installed in a country outside of the top-tier countries. If these regulations were to come into force (they were due to do so on May 15), Amazon or Microsoft would have to think twice before building server farms making heavy use of graphics processors to provide AI processing services, and would probably have to do so close to home. As a result, the development of AI in mid-tier countries, at a critical stage of the market’s development, would be harmed.
Last week, Bloomberg reported that Trump was planning to cancel the restrictions and adapt them to his tariffs policy in bilateral agreements with other countries. On Wednesday, the US Department of Commerce issued an official statement saying that “The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation. We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance.”
Israel low in pecking order
But while Saudi Arabia will benefit from this week’s visit by President Trump and from direct negotiations on a trade agreement and renewed imports of graphics processors, Israel finds itself at the bottom of the US administration’s priorities. “The US is currently preoccupied with the Chinese and is not very open to talks with Israel on the matter,” a senior source close to contacts with the US said. Another senior source added that the fact that the negotiations on tariffs and chip export restrictions were mainly the responsibility of US Trade Representative Jamieson Greer created a situation in which another hundred countries were now competing with Israel on reaching direct trade agreements that will include regulation of chip imports, and Israel, according to the report by Bloomberg, is not high on the list.
In order to obtain relaxations on chip imports, Israel is in talks with the US administration on boosting controls on the export of defense and dual-use products. While Israel is prepared to compromise in the talks and reach immediate agreement on that issue outside of regular trade agreements, the US administration is dragging its feet. The US is demanding, for example, that the list of products exports of which are controlled by the Ministry of Economy and Trade and the Ministry of Defense should be expanded to cover technology companies, in order to prevent the export of various products to China.
At present, the list consists of defense products and fintech services only. The US is also demanding that the Ministry of Finance should reinforce supervision and enforcement in the area of foreign investment, particularly investment from China, in civilian companies. Moreover, whereas in the past the contacts with the US would be via Israel’s National Security Council, they are now being conducted without an orderly interface, at the initiative of the Council, the Ministry of Finance, and the Ministry of Economy and Trade. In exchange for expanding controls, Israel seeks expansion of the strategic partnership with the US on technology and national security.
Published by Globes, Israel business news – en.globes.co.il – on May 12, 2025.
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