US government to re-evaluate restrictions on Portugal’s chip purchases

The US government will re-evaluate its decision to leave Portugal off the list of 18 ‘allies’ that escape the latest restrictions on the purchase of artificial intelligence (AI) chips, which include Nvidia’s latest generation graphics cards. ECO has learnt that the exclusion is not closed and could be reversed once the public consultation concludes on 15 May.

The new rules were one of the last measures taken by the previous US President. On 13 January, Joe Biden decided to extend the limits on the purchase of high-capacity processors and certain AI models to almost the entire world, creating a three-tier system that further deepened the ban on access to these critical technologies by countries such as China.

However, Portugal is also now subject to restrictions, albeit at an intermediate level, on a par with Israel. Meanwhile, a group of 18 countries considered ‘allies and partners’ of the US were exempt from these new limitations, including Spain, France and Italy, in a decision that took the Portuguese government by surprise.

By being isolated on the map and subject to restrictions, unlike its neighbours, the US option has triggered multiple efforts from various public and private entities, including diplomatic ones, to try to change this measure, officially called the Framework for the Dissemination of Artificial Intelligence.

In addition, the fact that Portugal is not considered an ally has also sparked a wave of speculation about what motivated this choice by the US government. Various theories have circulated in recent months, but the fundamental reason behind this choice is also the simplest and most obvious: Portugal’s proximity to China, which is still strong enough to cause discomfort in Washington.

Portuguese government trying to convince the US

Since January, the Biden administration’s measure has been under public consultation before coming into force, a deliberate choice to allow for changes by the new Trump administration. During this period, all interested parties are encouraged to submit comments by 15 May, and a source familiar with the situation told ECO that the Portuguese government itself has already presented its counter-arguments to the US authorities.

ECO also understands that the decision to keep Portugal off the list of allies is not final and will be re-evaluated. But all scenarios remain open, including the option of keeping the country subject to the restrictions, not least because Portugal has factors that play both in its favour and against it.

One of the aspects that could lead the US to reconsider the restrictions on Portugal is the interest of several American companies in investing in new data centres in the country. The AI chips whose US exports are restricted are essential components for building the most advanced data centres in this new technological era.

At the end of March, ECO reported the names of two Texas-based companies — Digital Realty and Prime Data Centres — that are closely following the Portuguese data centre market. The American company Equinix is also already planning a third data centre in Lisbon, at a time when it is finishing building the second one. There will be many more.

Another example is Start Campus, the consortium that is building a giant data centre in Sines, with 1.2 GW (gigawatts) of capacity, and which includes an American fund, Davidson Kempner. Despite the fact that the project involves an American company, it was discovered that the restriction could also penalise this 8.5 billion euro venture.

Portugal has one more point in its favour: the Portuguese authorities’ decision in 2023 which, in practice, banned Chinese technology company Huawei from supplying equipment and services for 5G networks. The fact that the country opted to go further than most member states in implementing the European Commission’s recommendations helped Portugal gain points in its bilateral relationship with the US.

But the great ‘irritant’ continues to be the closeness between Portugal and China, illustrated in a speech by the President of the Portuguese Republic at the end of 2018, when the country received an official visit from Chinese President Xi Jinping: “Feel at home, President Xi Jinping, just as we have felt at home in China for 500 years”, Marcelo Rebelo de Sousa said at the time, emphasising the “strong” economic and financial cooperation between the two nations.

Another aspect is the situation in Macau. The US restrictions on the sale of AI chips puts the former Portuguese colony on a par with the restrictions applied to China, which in practice means a ban.

In 2023, the Chinese Ministry of Foreign Affairs told Lusa that China maintains long-term friendly and “mutually beneficial” ties with Portugal, “in line with the interests of both sides”. This was after the then minister João Gomes Cravinho said that Lisbon would have to “review the meaning of the political and economic relationship” with China if Beijing provided military support for Russia’s invasion of Ukraine.

That same year, Vasco Rocha Vieira, the last governor of Macau, also said, quoted by Lusa, that China was “a superpower in the making” and that Macau’s history gave Portugal “privileged knowledge” of China, which could allow the country to “influence destinies, give opinions and advise” Brussels in its relationship with Beijing.

In addition to all these factors, the fact that the Chinese state maintains important investments in Portugal in strategic sectors, with significant shareholding positions in companies such as EDP, REN, BCP, Fidelidade and Mota-Engil, is even more noteworthy.

There is also a factor that is more technical than political. Last year, Luís Montenegro’s government began transposing the new European cybersecurity directive (NIS2), which is seen as a positive step towards increasing the country’s resilience. However, the fall of the government and the dissolution of parliament have put this process on hold.

The issue has also received attention in the European Union. As early as January, the European Commission reported that it had “shared” with the Biden administration that “it is in the economic interest” of the US for the European Union to be able to buy chips “without limitations” and that the European bloc represents “an opportunity” for the Americans, “not a security risk”. This issue was also discussed in the European Parliament in February.

Restrictions cause reputational damage to the country

If Portugal’s arguments fail to convince the US, the restrictions will not have an immediate material impact on the Portuguese economy, as ECO reported in February. This is due to the fact that there are currently no entities in the country that import quantities of chips that even come close to the imposed limitation of 50,000 units over a two-year period.

If Portugal’s arguments fail to convince the US, the restrictions will not have an immediate material impact on the Portuguese economy, as ECO reported in February. This is due to the fact that there are currently no entities in the country that import quantities of chips that even come close to the imposed limitation of 50,000 units over a two-year period.

To put the figures into perspective, Deucalion, the Portuguese supercomputer, has approximately 130 graphics cards (also known as GPUs). “The day [someone in] Portugal bought 1,000 H100 graphics cards [from Nvidia], it would be all over the media. Those responsible would be interviewed”, Rui Oliveira, director of the Minho Advanced Computing Centre (MACC), explained to ECO in February.

However, the same expert argued that the US option would cause great reputational damage for Portugal, as it would leave the country isolated on the map. “The perception created when a European map is published where everything is painted in the same colour, except Portugal and more remote countries, where all its neighbours have no restrictions, raises the question of ‘what’s going on, why Portugal?'”, he said.

“From the point of view of perception, it’s a shame, it’s worrying, or at least always strange. And it would make sense to understand the more political side of it. This ends up having commercial repercussions, not necessarily on the GPUs, but on the image it conveys”, the researcher added.

In addition to this impact on the national image, the restriction on chip sales to Portugal could become more significant in the future, threatening to complicate any Portuguese bid to attract one of the five AI Gigafactories that the European Commission will fund over the next few years under the AI Continent Action Plan, presented this April. These structures will be huge data centres focused on AI, which could have up to 100,000 state-of-the-art chips.

At the time the US decision was announced, and afterwards, ECO tried to get clarification from the Ministry of Economy and the Ministry of Modernisation and Youth (which oversees AI in Portugal), but was unable to obtain any comment.

In March, ECO also approached the US embassy in Lisbon for clarification on Portugal’s non-inclusion on the list of allies exempt from restrictions. The official source only replied: “We have nothing to share on this, but we encourage interested public and private entities to submit their comments during the 120-day public consultation period”. The embassy also forwarded future clarifications to the US Department of Commerce, without giving further details.

Moreover, the semiconductor industry is now in the eye of the trade war hurricane, and is already in President Donald Trump’s sights for the imposition of new tariffs. In addition, last week Nvidia revealed that it had been banned by the US government from selling to China, without a licence, a type of AI chip that was not yet subject to export restrictions. The company estimated an immediate impact of 5.5 billion dollars.