Core Viewpoint - The BIS has officially abolished Biden's AI diffusion rules, leading to a noticeable improvement in market sentiment, with AI narratives regaining dominance after being influenced by tariffs and macroeconomic factors for two months [1][2] Summary by Sections BIS New Rules - The core ideas of the new rules being replaced by BIS include: 1. Using Huawei Ascend chips anywhere in the world violates export controls [1] 2. There will be warnings for using American chips to train and infer Chinese AI models [1] Implications for China - The implications of these rules raise significant questions: 1. It is unclear if Huawei Ascend chips can be used locally in China, and if BAT (Baidu, Alibaba, Tencent) uses them, it would violate U.S. export controls [1] 2. The prohibition on using American chips for training Chinese models suggests that even if China acquires NV cards, they can only infer U.S. models, complicating enforcement due to the nature of open-source models [1] 3. For overseas cloud service providers, hosting Chinese open-source models may lead to public warnings, but the effectiveness of such measures remains uncertain [1] Enforcement Challenges - The enforcement of these rules presents challenges: - The ability of BIS to regulate U.S. companies overseas is clearer, but the restrictions on using Huawei Ascend and NV cards within China may be seen as overreach [1] - The potential for compliance challenges for large Chinese companies like BAT is significant, but actual enforcement may prove difficult [1] Market Impact - The policy structure is seen as favorable for NV (NVIDIA), as it removes significant AI diffusion risks and suppresses potential global competition from Huawei [2] - Following the announcement, NV shares increased by 5%, returning to previous trading levels [2]