The Biden administration is considering a raft of new curbs on the sale of chips to China, aiming to disrupt Beijing’s use of artificial intelligence for hacking and weapons development. At the same time, the administration is rolling out $39 billion in grants for new U.S. chip-making plants after the passage of the Chips Act last year.

“Allowing the industry to have continued access to the China market, the world’s largest commercial market for commodity semiconductors, is important to avoid undermining the positive impact of this effort,” the Semiconductor Industry Association, the Washington, D.C. industry body, said in a written statement.

U.S. chip companies have long argued that the government should carefully weigh the impact of export restrictions, because sales in China support investments in the U.S. and help fund research that sustains their technological edge.

Chip companies, including the AI-chip leader Nvidia, have been lobbying the administration to refrain from stricter export controls after a ratcheting-up of tensions between the U.S. and China that has centered on the semiconductor and electric-vehicle industries. Nvidia’s chief financial officer warned of a “permanent loss of opportunities for the U.S. industry” in China if sales of AI chips were prohibited.

Restrictions the SIA described as overly broad, ambiguous and at times unilateral “risk diminishing the U.S. semiconductor industry’s competitiveness, disrupting supply chains, causing significant market uncertainty, and prompting continued escalatory retaliation by China,” the SIA said. It called on the Biden administration to consult with industry before imposing more restrictions.

The U.S. last October imposed some of the most stringent curbs yet on chips and chip-making equipment, requiring chip companies to seek licenses from the Commerce Department to sell some of their most advanced products to Chinese customers.

The measures are aimed at preventing U.S. technology from advancing China’s military power.

Biden administration officials say they believe China is using U.S. chips and related technologies to fuel the modernization of its military, including developing weapons of mass destruction, as well as to enable large-scale surveillance activities that lead to human-rights abuses.

China, in turn, has banned major Chinese companies from buying from U.S. computer-memory company Micron, and recently imposed restrictions on exports of metals used in cellphone communication chips.

The Biden administration is now considering further restrictions that would snare AI chips that Nvidia developed for the Chinese market. It is also considering cutting off Chinese access to AI chips through cloud-computing companies. Biden is expected to restrict U.S. investment in advanced Chinese chip-making, among other technologies, in a coming executive order.

The industry push comes as the Biden administration tries to find new diplomatic openings with Beijing. Treasury Secretary Janet Yellen traveled to Beijing this month amid a flurry of visits by U.S. officials, with limited signs of progress.

Numerous chip companies are planning large chip-making projects in the U.S. after the passage of the Chips Act last year. Among them are Intel, Micron, Samsung and Taiwan Semiconductor Manufacturing Co., which together are plowing tens of billions of dollars into new plants that policy makers hope will help reverse the industry’s shift toward Asia in recent decades.

Write to Asa Fitch at asa.fitch@wsj.com