Trump’s China-Nvidia Dealing Threatens DOJ Chip Smuggling Trial

President Donald Trump’s approval for Nvidia to sell chips to some customers in China has potentially derailed a major AI smuggling prosecution nearing trial after the judge ordered the Justice Department to disclose internal White House communications.

In an unusual decision, a Houston federal judge earlier in June directed federal prosecutors to provide the defense nonpublic presidential materials reflecting Trump policies that relaxed restrictions on Nvidia shipments to China. DOJ last week asked the court to reconsider, arguing the communications are privileged, but the judge previously indicated that failure to produce would warrant a dismissal.

The president’s dealmaking with China at Nvidia’s behest has already been criticized by lawmakers as a risk to national security that jeopardizes US competition in a global AI technology race. Now, it’s also complicating his administration’s law enforcement efforts to bring a case promoted in December as vital to protecting the country’s technological and military superiority from adversaries.

Lawyers for one of the two businessmen indicted for evading export control laws by transporting $160 million in Nvidia’s powerful generative AI-accelerating H100 and H200 processors have argued that further information on Trump’s deliberations with Nvidia and China may prove their client’s innocence.

Hours after DOJ first announced the charges last December, Trump undermined the prosecution by declaring on Truth Social that he was letting Nvidia ship H200 chips to vetted customers in China.

National security prosecutors in Washington and Texas have contended that distribution of the chips still wasn’t licensed at the time of the alleged 2025 scheme. Trump’s policy reversal—including plans to give the US a 25% cut of the revenue—remains subject to ongoing negotiations with Chinese leader Xi Jinping.

Senior Judge Kenneth Hoyt has postponed the trial, which had been scheduled to begin Monday, to an undetermined date, said an employee in his chambers. Whenever the trial commences, prosecutors must contend with conflicting diplomatic considerations as they try to prove two men conspired with overseas companies to smuggle chips into China.

“You never want to have a situation where larger policy concerns are complicating the message that you’re trying to bring at trial when you’re the government,” said Aaron Zelinsky, a Zuckerman Spaeder partner and former DOJ national security prosecutor. “Obviously the government writ large is sending mixed messages about the importance of these export controls.”

Liz Cannon, who supervised export controls cases at the same National Security Division section bringing the chip-smuggling case, said prosecutors might need to try overcoming this hurdle by calling a Commerce Department licensing officer as a witness. The officer could explain that the president’s comments didn’t actually change policy at the time, said Cannon, who is now a partner at Hogan Lovells.

White House Control

How DOJ reckons with the judge’s discovery order is one of several pending matters that likely must be resolved before a trial can begin.

Hoyt’s broadly construed ruling effectively determined Trump or any president is an extension of the prosecution team. It’s also vague as to which deliberative materials he wants prosecutors to disclose.

Discovery rules obligate DOJ “to examine any and all statements published or unpublished to determine whether any policy has been adopted by the President that tangentially or otherwise impacts the enforcement of the laws or statuses under consideration in this case,” Hoyt wrote. “Irrespective of the relationship between the sitting President and the DOJ, together they represent the arm or branch of the government that prosecutes” defendants.

This interpretation went further than the defense’s arguments, which were more specific to how Trump’s tight control of DOJ has rendered his actions subject to discovery.

Even if the judge’s order winds up overturned on appeal, the defense’s point about the president’s involvement in prosecution decisions may still pose a problem for DOJ going forward, Cannon said.

“It’s not entirely a surprise that a court would determine that the White House in this context is part of the prosecution team because the Trump administration has done so much to very publicly direct DOJ and to bring DOJ closer to the White House,” she added. “I think the Trump administration has somewhat brought this upon themselves.”