U.S. Administration Tightens Oversight on Chinese Equipment for Data Centers

The Trump administration is increasing its scrutiny of Chinese-manufactured equipment that powers America’s data centers. This move comes amid rising security concerns linked to national safety, especially as the demand for electricity to support AI systems surges.

Recently, President Donald Trump signed an executive order that identifies foreign-made equipment for the bulk-power system as an “extraordinary foreign threat,” declaring a national emergency. This order gives the U.S. Energy Department the power to limit or impose conditions on transactions involving equipment critical to the power grid and data spaces.

In conjunction with the executive order, Trump noted that the threat to the U.S. from foreign supply chains for electric equipment has become increasingly severe since his initial term. He indicated that the rapid advancement of various sectors—including manufacturing, data centers, and artificial intelligence—has heightened the country’s reliance on a stable electricity supply and intensified the risks associated with potential attacks or supply disruptions on the bulk-power system.

The executive order builds on an earlier Presidential Determination from April. In that determination, Trump identified key components like transformers, transmission lines, and substations as essential to national defense.

Chinese firms significantly contribute to the supply of essential equipment for data center power systems. This includes transformers, switchgear, batteries, and optical transceivers crucial for AI operations. Yury Dvorkin, an associate professor at Johns Hopkins University, pointed out that the mid-term risks are primarily centered on grid connectors such as transformers and batteries, with China accounting for nearly 30% of certain transformer categories and over 40% of U.S. battery imports. Moreover, he mentioned deeper vulnerabilities in the supply chain regarding materials like copper and electrical steel.

According to Ben Boucher, a senior analyst at Wood Mackenzie, the reliance on Chinese imports affects various elements of AI infrastructure. He emphasized the importance of substation transformers, which are typically used by large-scale data operations.

Laveena Iyer, a senior analyst at The Economist Group, remarked that scrutiny over China’s role in U.S. data center power infrastructure has markedly increased over the past several months. She noted that the focus has shifted from just computing technology to broader concerns about power management.

In response to these concerns, some companies are ramping up domestic production efforts. Hitachi Energy announced a $1 billion investment in September 2025 for bolstering critical grid infrastructure manufacturing in the U.S., including plans for a new transformer facility. Siemens Energy also revealed a $1 billion investment in February aimed at U.S. manufacturing for grid and gas turbine equipment supporting AI infrastructure.

The optical transceiver market exhibits a similar trend. Chinese firms like Zhongji Innolight and Eoptolink dominate global revenue in this area, collectively accounting for about two-thirds of the world’s optical transceiver supply, as reported by analyst Neil Shah in August.

U.S. companies such as Lumentum and Coherent stand to gain from potential restrictions on their Chinese counterparts. For instance, Nvidia has invested $2 billion each in both companies recently.