The US-China trade conflict has moved beyond soybeans and tariffs to focus on advanced semiconductors and artificial intelligence, with Nvidia emerging as a central player in Washington's bargaining power, reports the Australian Financial Review.

US President Donald Trump's inclusion of Nvidia chief executive Jensen Huang on his flight to Beijing this month underscored the importance of technology in diplomacy. Mr. Trump also brought Tesla's Elon Musk and Apple's Tim Cook, signaling that frontier technology companies now matter as much as diplomats.

Analysts said technology has become a weapon of national security. Nvidia's high-performance chips, vital for training large language models, are in such demand that its profits rival the economies of small nations. Governments increasingly view access to semiconductors as strategic rather than commercial.

Washington restricted China's access to advanced chips under the CHIPS and Science Act in 2022. Export controls sought to slow China's AI development, highlighting US leverage in semiconductors and advanced computing. Observers said China's AI compute stock now lags two to three years behind the US.

The US is weighing how much of this leverage to trade as Washington seeks cooperation from Beijing on rare earths and Middle East stability. Analysts described the evolving relationship as managed transactional interdependence.

Beijing holds sway in rare earths and critical minerals, dominating supply chains for electric vehicles, batteries, and defense systems. It has signaled a willingness to weaponize access to these materials in response to US chip restrictions.

Despite diversification efforts, US firms remain tied to China's scale and consumer market. Apple and Tesla depend heavily on Chinese networks, while American financiers emphasize the US advantage in capital markets, which remain deeper than China's.

Analysts noted that Beijing's intervention in its tech sector has dampened entrepreneurship, with regulators blocking deals and curbing private firms. This has reinforced the appeal of US-linked financial systems for Chinese start-ups.

China, meanwhile, is advancing in 'physical AI,' embedding artificial intelligence into hardware such as electric vehicles and robotics. At Beijing's auto show, car makers showcased AI-driven systems and humanoid robots, highlighting progress in industrial applications.

Export controls have forced Chinese labs to become more efficient, with open-source models only months behind US frontiers despite limited compute. Analysts said tariffs now look minor compared with the battle over AI chips, rare earths, and robotics that will shape global power in the next decade.