Nvidia Corp., a chip manufacturer, claimed on Wednesday that U.S. officials had instructed it to stop exporting two of the best computing chips for artificial intelligence work to China. This could severely limit Chinese companies’ ability to perform advanced tasks like image recognition and hurt Nvidia’s business in China.
After hours, shares of Nvidia dropped 6.6%. The business claimed the prohibition, which applies to its A100 and H100 processors made to accelerate machine learning operations, could obstruct the development of the H100, the company’s flagship chip unveiled this year by Nvidia.
Advanced Micro Devices Inc. shares, a competitor of Nvidia, decreased 3.7% after hours. According to a spokeswoman for AMD, MI100 chips won’t be impacted by the new licence requirements, but the company has received new licence requirements that will prevent the export of MI250 artificial intelligence chips to China. According to AMD, the new regulations won’t have a significant effect on its operations.
The new rule, according to Nvidia, “will address the danger that the covered items may be used in, or diverted to, a’military end use’ or’military end user’ in China,” according to U.S. authorities.
When contacted for comment, the U.S. Department of Commerce declined to specify what new standards it has established for AI chips that are no longer allowed to be sent to China but did state that it is examining its methods to “keep innovative technologies out of the wrong hands.”
According to a spokeswoman, “we are taking a comprehensive approach to implement additional actions necessary linked to technology, end-uses, and end-users to defend U.S. national security and foreign policy interests.” However, at this time, we are unable to define specific policy adjustments.
The announcement marks a significant increase in the U.S. crackdown on China’s technological prowess as tensions over Taiwan’s future, where chips for Nvidia and nearly all other big semiconductor companies are manufactured, rise.
Chinese firms won’t be able to efficiently do the kind of advanced computation needed for image and speech recognition, among many other jobs, without American chips from companies like Nvidia and AMD.
Consumer applications like smartphones that can respond to inquiries and tag photographs frequently use machine learning, natural language processing, and speech recognition. Additionally, they are employed by the military for tasks like searching satellite pictures for bases or weapons, as well as screening digital communications for intelligence gathering.
Nvidia claimed that if Chinese companies choose not to purchase alternative Nvidia products, it could lose $400 million in sales of the affected chips it has scheduled for China this quarter. It stated that while it intends to ask for exceptions to the regulation, there are “no certainties” that U.S. authorities will do so.
According to Stacy Rasgon, a financial analyst at Bernstein, the disclosure indicated that 10% or so of Nvidia’s data centre sales—which investors have closely followed in recent years—come from China, and that the company’s sales decline will probably be “manageable.”
Rasgon added, “It’s not changing the investing thesis, but it’s not good looking.” Regarding potential future escalation, he stated, “What happens on both sides now is the question.
The chip restriction comes as Nvidia previously predicted last week that the current quarter will see a significant decline in sales due to a weaker gaming market. According to Nvidia, third-quarter sales should total $5.90 billion, a 17% decrease from the same period last year.
