Nvidia shares climbed more than 3% Wednesday after the Trump administration confirmed it will rescind the Biden-era "AI diffusion rule," a sweeping regulation that would have imposed strict licensing requirements on exports of high-end artificial intelligence chips. The decision, confirmed by the Department of Commerce, marks a major win for U.S. chipmakers and signals a dramatic shift in American AI policy.

The AI diffusion rule, introduced in the final days of the Biden administration, was scheduled to take effect May 15. It would have divided countries into three tiers, each facing varying degrees of export restrictions on advanced AI chips such as those produced by Nvidia, AMD, and Intel. Industry executives had warned the rule would severely limit access to foreign markets and damage American technological leadership.

"The Biden AI rule is overly complex, overly bureaucratic, and would stymie American innovation," a spokesperson for the Commerce Department's Bureau of Industry and Security said in a statement. "We will be replacing it with a much simpler rule that unleashes American innovation and ensures American AI dominance."

A Department of Commerce official confirmed to CNBC that the rule would be withdrawn, following earlier reports from Bloomberg and Axios. The agency is expected to release a new control framework in the coming months, potentially through a new rule or executive order.

Nvidia, which had lobbied aggressively against the Biden regulation, welcomed the move. "With the AI Diffusion Rule revoked, America will have a once-in-a-generation opportunity to lead the next industrial revolution and create high-paying U.S. jobs, build new U.S.-supplied infrastructure, and alleviate the trade deficit," a company spokesperson said.

AMD also supported the administration's reversal. CEO Lisa Su told CNBC the U.S. must strike a balance between national security and access to global markets.

Nvidia CEO Jensen Huang, speaking earlier this week, warned that cutting off the Chinese AI market would be a "tremendous loss." The company's chips are central to training and deploying large AI models, and China remains a significant customer despite broader U.S.-China tech tensions.

Saudi Arabia and the United Arab Emirates, both facing potential restrictions under the now-defunct rule, had reportedly lobbied for exemptions. President Trump is expected to visit both nations next week, according to officials familiar with the matter.