US President Joe Biden speaks on how “Bidenomics” is helping clean energy and manufacturing, at Arcosa Wind Towers in Belen, New Mexico, on August 9, 2023.
Jim Watson | AFP | Getty Images
The Biden administration’s executive order restricting U.S. private equity and venture capital investments in Chinese technology finally landed on Wednesday. For U.S. tech investors who’d already grown wary of the budding cross-Pacific rivalry, the ruling is the clearest signal yet that the world’s second-biggest economy is off limits.
Biden is specifically targeting investments in technologies like semiconductors, quantum computing and artificial intelligence on concern that China’s advancements in those areas run counter to U.S. national security interests. The new measure is expected to go into effect next year.
U.S. investors have been steadily retreating from China due to a combination of a weakening economy and the fraught geopolitical environment. Combined U.S. private equity and venture investments in China fell to an eight-year low in 2022 in terms of capital deployed, a trend that continued into the first half of this year, according to PitchBook data.
“We’ve had conversations with with our own clients who have said, ‘Yeah, look, we’ve really been pulling back on on our presence in China for a little while,'” said Elena McGovern, co-head of the national security practice at private equity advisory firm Capstone, in an interview. “This is the first time that the U.S. government is imposing restrictions on how U.S. capital flows out of the country, how U.S. investors are making investment decisions. So that is a new era.”
Political pressure has been bipartisan. Last month, the House Select Committee on the Chinese Communist Party sent letters to four U.S. venture firms, expressing “serious concern” about their investments in Chinese tech startups. And in July, legendary VC firm Sequoia Capital saidit would split its international business into three parts, with Neil Shen helming its powerful Sequoia China unit.
At this point, any technology that can be used to enhanced China’s military strength or surveillance capabilities is of notable concern to the White House.
“U.S. money should not be used to finance Beijing’s military development,” said Eric Reiner, managing partner at Vine Ventures, which backs early-stage companies in the U.S., Israel and Latin America. “A lot of these firms that have been investing in China and setting up offices there are really playing with fire.”
While AI, computer processors, and quantum computing are areas of stated concern, many investors and experts say they have to move forward with the expectation that the ban will widen, essentially making any deal in Chinese technology too risky to pursue.
“It’s likely to deter investments in those sectors, even beyond what is explicitly prohibited,” said, Adam Hickey, a former deputy assistant attorney general for the Justice Department’s national security division who’s now a partner at law firm Mayer Brown. “Most investors want to avoid being seen as acting against U.S. national security interests.”
Steve Sarracino, the founder of Activant Capital, said “I don’t know anyone that’s doing early-stage China investing from from the U.S.” The only exception, he said, were “hedge funds, who really are in the business of calculating geopolitical risks.” Activant has offices in the U.S., Germany and South Africa.
The U.S. government’s ongoing hostility towards China carries its own risks. For one, there’s a ton of investment money in and around China that can fill the vacuum and potentially generate huge returns. There’s also the challenge of dealing with existing investments.
For example, major U.S. venture firms have invested in ByteDance, the parent of mobile video app TikTok, which has faced the threat of a potential ban in the U.S. or a forced sale to keep operating. Investors want to maximize their returns, which could be huge should ByteDance go public.
TikTok CEO Shou Zi Chew testifies before the House Energy and Commerce Committee hearing on “TikTok: How Congress Can Safeguard American Data Privacy and Protect Children from Online Harms,” on Capitol Hill, March 23, 2023, in Washington, DC.
Olivier Douliery | Afp | Getty Images
ByteDance reportedly scrapped a planned U.S. listing in 2021 after the company learned it needed to deal with potential security concerns. That same year, China cracked down on domestic companies that traded on U.S. exchanges. With the tech IPO markets still largely closed and U.S.-China tension only building, it’s not clear when or how ByteDance investors will realize their gains.
Other investors worry that if relations eventually improve between the two countries, U.S. firms will be at a disadvantage when it comes to finding and getting into deals. Rebuilding trust will likely be a particular challenge.
“If you already had a presence there, you will have an advantage when things open up,” Sarracino said. But that’s not the case for firms that weren’t in China or those that pared back their operations in the country, he said.
Reiner says the investment returns that could be generated from Chinese companies aren’t worth the global threat posed by having China own and control sensitive technologies.
“I wonder if the executive order itself is even really necessary,” he said, “or if we really should be spending our time securing our resources and incentivizing China not to spy on our important and proprietary technology.”
A motorcycle is seen near a building of the Taiwan Semiconductor Manufacturing Company (TSMC), which is a Taiwanese multinational semiconductor contract manufacturing and design company, in Hsinchu, Taiwan, on April 16, 2025.
Here are TSMC’s first-quarter results versus LSEG consensus estimates:
Revenue: $839.25 billion New Taiwan dollars, vs. NT$835.13 billion expected
Net income: NT$361.56 billion, vs. NT$354.14 billion
TSMC’s reported net income increased 60.3% from a year ago to NT$361.56 billion, while net revenue in the March quarter rose 41.6% from a year earlier to NT$839.25 billion.
The world’s largest contract chip manufacturer has benefited from the AI boom as it produces advanced processors for clients such American chip designer Nvidia.
However, the company faces headwinds from the trade policy of U.S. President Donald Trump, who has placed broad trade tariffs on Taiwan and stricter export controls on TSMC clients Nvidia and AMD.
Semiconductor export controls could also be expanded next month under the “AI diffusion rules” first proposed by the Biden administration, further restricting the sales of chipmakers that use TSMC foundries.
Taiwan currently faces a blanket 10% tariff from the Trump administration and that could rise to 32% after the President’s 90-day pause of his “reciprocal tariffs” ends unless it reaches a deal with the U.S.
As part of efforts to diversify its supply chains, TSMC has been investing billions in overseas facilities, though the lion’s share of its manufacturing remains in Taiwan.
In an apparent response to Trump’s trade policy, TSMC last month announced plans to invest an additional $100 billion in the U.S. on top of the $65 billion it has committed to three plants in the U.S.
On Monday, AMD said it would soon manufacture processor chips at one of the new Arizona-based TSMC facilities, marking the first time that its chips will be manufactured in the U.S.
The same day, Nvidia announced that it has already started production of its Blackwell chips at TSMC’s Arizona plants. It plans to produce up to half a trillion dollars of AI infrastructure in the U.S. over the next four years through partners, including TSMC.
Taiwan-listed shares of TSMC were down about 0.4%. Shares have lost about 20% so far this year.
Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the opening ceremony of the Siliconware Precision Industries Co. (SPIL) Tan Ke Plant in Taichung, Taiwan, on Thursday, Jan. 16, 2025.
An Rong Xu | Bloomberg | Getty Images
A day after Nvidia revealed it would incur $5.5 billion in costs related to canceled orders for the H20 chip, which the government said this week requires a license to export to China, the company said it abides by rules on where it can sell its artificial intelligence processors.
“The U.S. government instructs American businesses on what they can sell and where — we follow the government’s directions to the letter,” an Nvidia representative said in a statement.
Nvidia said the statement was in response to a House Select Committee focused on national security threats from China, which opened an investigation into Nvidia’s sales on Wednesday. The H20 was introduced by Nvidia after the Biden administration restricted AI chip exports in 2022. It’s a slowed-down version intended to comply with U.S. export controls.
Nvidia’s brief comment is an indication of how the company is going to defend its business in Washington, D.C., as its technology draws increased scrutiny related to national defense and security. The company’s stock price tumbled almost 7% on Wednesday.
Nvidia’s chips have the vast majority of the market for AI applications, and some were used by China’s DeepSeek to build R1, which upended markets in January.
On Wednesday, the chipmaker touted the taxes it paid, its U.S.-based workforce, and its role as a technology leader.
The company’s exports even help the U.S. fix its trade deficit, the statement said, directly addressing President Trump’s stated reason for introducing tariffs earlier this month.
“NVIDIA protects and enhances national security by creating U.S. jobs and infrastructure, promoting U.S. technology leadership, bringing billions of dollars of tax revenue to the U.S. treasury, and alleviating the massive U.S. trade deficit,” according to the statement.
One challenge for Nvidia is that the H20 was legal for export to China until last week, under previous Biden administration rules. But the House Select Committee said on Wednesday the sale of H20 chips for the past year was effectively a “loophole.”
“The technology industry supports America when it exports to well-known companies worldwide – if the government felt otherwise, it would instruct us,” Nvidia said in its statement.
The government is also investigating whether shipments of restricted chips to China went through Singapore, Nvidia’s second-largest market by billing address with just under $24 billion in sales in the company’s past fiscal year, according to filings.
Nvidia clarified on Wednesday that its Singapore revenue indicates sales with a billing address in the country, often for subsidiaries of U.S. customers.
“The associated products are shipped to other locations, including the United States and Taiwan, not to China,” Nvidia said.
In addition to Chinese export controls and the congressional investigation, Nvidia also faces additional restrictions on what it can export starting next month, under “AI diffusion rules” first proposed by the Biden administration.
Former Cybersecurity and Infrastructure Security Agency Director Chris Krebs testifies before a Senate Homeland Security and Governmental Affairs hearing to examine claims of voter irregularities in the 2020 election, in the Dirksen Senate Office Building, in Washington, U.S., December 16, 2020.
Jim Lo Scalzo | Reuters
A week ago, President Donald Trump signed an executive order targeting former Cybersecurity and Infrastructure Security Agency Chief Chris Krebs, and calling on the government to suspend the security clearances of any entities with whom he’s associated. The order specifically named SentinelOne, Krebs’ employer.
On Wednesday, Krebs announced his resignation from SentinelOne, a cybersecurity company with a $5.6 billion market cap. While Krebs said the choice was his alone, his swift departure is the latest example of the effect Trump is having on the private sector when it comes to pressuring people and institutions that he personally dislikes.
Krebs had served as SentinelOne’s chief intelligence and public policy officer since late 2023, when the company acquired his consulting firm.
“For those who know me, you know I don’t shy away from tough fights,” Krebs wrote in an email to SentinelOne staffers that the company posted on its website. “But I also know this is one I need to take on fully — outside of SentinelOne. This will require my complete focus and energy. It’s a fight for democracy, for freedom of speech, and for the rule of law. I’m prepared to give it everything I’ve got.”
Krebs served as the first CISA director from 2018 until he was fired in November 2020 after declaring that the presidential election, which Democrat Joe Biden won, was “the most secure in American history.” CISA is part of the Department of Homeland Security.
In his executive order on April 9, which took the extraordinary approach of going after a specific individual, Trump called Krebs a “bad-faith actor who weaponized and abused his Government authority.”
“Krebs’ misconduct involved the censorship of disfavored speech implicating the 2020 election and COVID-19 pandemic,” the order said. “Krebs, through CISA, falsely and baselessly denied that the 2020 election was rigged and stolen, including by inappropriately and categorically dismissing widespread election malfeasance and serious vulnerabilities with voting machines.”
Trump directed the attorney general, director of national intelligence and “all other relevant agencies” to suspend “any active security clearances held by individuals at entities associated with Krebs, including SentinelOne, pending a review of whether such clearances are consistent with the national interest.”
The Wall Street Journal was first to report on Krebs’ departure from SentinelOne, publishing a story on Wednesday based on an interview with Krebs. He told the Journal that he was leaving to push back on Trump’s efforts “to go after corporate interests and corporate relationships.”
The demands on SentinelOne resemble campaigns that President Trump has waged against law firms and universities that he’s tried to strongarm into making significant changes in how they operate or else lose government contracts or funding.
SentinelOne, which uses artificial intelligence to detect threat and prevent cyberattacks, doesn’t disclose how much of its revenue comes from the government. But the company acknowledges in the risk factors section of its financial reports that it relies on government agencies for some of its business and can be hurt by changes in policy.
“Our future growth depends, in part, on increasing sales to government organizations,” the latest quarterly filing says. Specific to Trump, SentinelOne said that the establishment of the Department of Government Efficiency, which Elon Musk is running, could lead to budgetary changes that “adversely affect the funding for and purchases of our platform by government organizations.”
SentinelOne CEO Tomer Weingarten told employees in a memo, also posted to the company’s site on Wednesday, that Krebs “helped shape important conversations and strengthened public-private collaboration.” The company previously said, in a blog post after the executive order, that fewer than 10 employees had security clearances.
“Accordingly, we do not expect this to materially impact our business in any way,” the post said.