David Sacks says overly strict US export controls may backfire because China's AI models are just 'months behind'

• David Sacks says overly strict chip export rules may weaken US tech dominance in the long run.
• He said DeepSeek demonstrated China's ability to advance despite export controls.
• US chip export rules could end up helping Chinese companies like Huawei gain ground globally, he said.

China is closing the AI gap fast, and the US must rethink its chip export controls if it wants to stay ahead, said David Sacks, the White House's AI and crypto czar.

In a Bloomberg Television interview published on Wednesday, Sacks said that the US should be mindful of the speed at which Chinese companies are catching up in the AI race despite the chip export rules in place.

Even though China is "supply-constrained" on the number of chips it can produce, Sacks said he expects that to change quickly.

"Back in January, we had this DeepSeek moment where, before DeepSeek, people thought that Chinese AI models were years behind. And then DeepSeek launched, we realized that maybe they're more like three to six months behind," Sacks said.

Sacks added that he thinks China might be one and a half to two years behind the US in chip design, but companies like Huawei are "moving fast" to catch up.

"Even before they fully caught up, I think you will see them exporting their chips for the global market," he said, adding that this could cause the US to lose its edge.

"If we're overly restrictive in terms of US sales to the world, I think there'll be a time where we're kind of kicking ourselves when, all of a sudden, Huawei is everywhere," he said. "We'll be saying, well, wait, when we had this whole market to ourselves, why didn't we take advantage of the opportunity and lock in the American tech stock?"

Other tech leaders have similarly highlighted concerns with US export controls, which often hit their businesses' bottom lines.

During the Computex Taipei tech conference in May, Nvidia's Jensen Huang slammed US chip export rules because they encouraged Chinese tech development.

"The export control gave them the spirit, the energy, and the government support to accelerate their development. So I think, all in all, the export control is a failure," Huang said. He added that Nvidia's market share in China has decreased to 50%, down from 95% four years ago.

Bernstein analysts said in an April note that banning Nvidia chips is unlikely to stop China's AI progress, as Chinese firms are turning to domestic alternatives like Huawei.

"In the longer run, expect Huawei to keep closing the gap in performance and Chinese foundational models making up for compute deficiency with Deepseek-like innovation," the analysts wrote.

A representative for Sacks did not immediately respond to a request for comment sent by Business Insider outside regular hours.