WASHINGTON (Reuters) -The head of a House of Representatives panel on China told U.S. Commerce Secretary Howard Lutnick that resuming sales of Nvidia's H20 chips to China threatens to advance Beijing's AI capability, stepping up his criticism of the decision and saying the original ban was "the right call."

Republican Representative John Moolenaar, in a letter to Lutnick on Friday, warned the chips could undermine the U.S.' AI advantage and may help Chinese companies capture global AI model market share.

"The Commerce Department made the right call in banning the H20," Moolenaar said in the letter, demanding more information. "We can't let the (Chinese Communist Party) use American chips to train AI models that will power its military, censor its people, and undercut American innovation."

Nvidia's announcement this week that it would be allowed to resume sales reversed an export restriction imposed by the Trump administration in April to keep advanced AI chips such as the H20 out of Chinese hands over national security concerns, an issue that has found rare bipartisan support. It drew swift questions and criticism from U.S. legislators, including Moolenaar, who said on Monday that he would seek "clarification" from the Commerce Department.

Shares of Nvidia turned negative on Friday after Moolenaar came out with the stronger criticism.

An Nvidia spokesperson later defended the U.S.' relaxation of restrictions, saying America wins when the world builds on U.S. technology. "The government made the best decision for America, promoting U.S. technology leadership, economic growth and national security," the spokesperson said in a statement.

A representative of the Commerce Department did not immediately respond to a request for comment.

The letter was an unusual example of public disagreement with a Trump administration policy from a fellow Republican, signaling the depth of the national security concerns around the AI chip's export to China among China hawks in Washington.

On Tuesday, Lutnick said the planned resumption of sales of the H20 chip was part of U.S. negotiations on rare earths and magnets.

It also was a sign the United States was relaxing restrictions on the export of AI technology to China.

Nvidia designed the H20 chip for the Chinese market after the Biden administration restricted exports of other of its advanced chips to China.

But the H20 is still competitive at inference, where AI models serve up answers to users, which is fast becoming the biggest part of the AI chip market. Its capabilities also could be used in supercomputers.

According to an April 2025 report by the Select Committee on China, Nvidia's H20 chips were instrumental in enabling an AI model by Chinese company DeepSeek that surprised the world earlier this year.

Tech companies like China's Tencent also have used H20s to train massive AI systems, according to Moolenaar, who said there was growing evidence H20 chips are being used by Chinese AI companies to build supercomputers.

Under the policy change, the U.S. still must approve licenses for the export of H20 chips. But Nvidia said it had been assured licenses would be granted, and it hoped to start deliveries soon.

In his letter to Lutnick, Moolenaar requested a briefing as soon as possible, but no later than August 8, on how the Department of Commerce plans to evaluate license applications for the H20 and similar chips, the estimated number of H20s to be exported and to whom.

"The H20 significantly outperforms anything Chinese chipmakers like Huawei can currently produce" at scale, Moolenaar wrote, "and would therefore provide a substantial increase to China's AI development."