In a move that underscores the escalating tensions in the tech sector, the U.S. Department of Commerce has announced its intention to further restrict the sale of advanced artificial intelligence (AI) chips to China. This decision comes as part of a broader effort to close loopholes that emerged after last year's AI chip export restrictions were implemented.
The primary target of these new restrictions is Nvidia's H800 chip, a slightly modified version of the Nvidia H100. The H100 had previously been banned from sale due to its popularity among U.S. AI firms, including OpenAI. Chinese companies, in response, had turned to the H800 or A800 versions, which complied with U.S. regulations primarily by reducing on-device connection speeds, known as interconnects. However, with the new rules in place, these chips will also be prohibited, as confirmed by senior administration officials during a press briefing.
The ripple effects of this decision were immediately felt in the stock market. Shares of prominent chip manufacturers, including Nvidia, Broadcom, Marvell, AMD, and Intel, experienced declines. Nvidia's stock, in particular, saw a decrease of about 5%.
While the restrictions are expected to impact the AI semiconductor market significantly, Nvidia appears to have anticipated this move. In a statement made in August, the company mentioned that while there might be long-term implications, they don't foresee an immediate material effect on earnings. An Nvidia spokesperson further clarified to CNBC, stating, "Given the demand worldwide for our products, we don't expect a near-term meaningful impact on our financial results."
The overarching aim of these U.S. restrictions is to hinder Chinese access to cutting-edge semiconductors that could lead to significant advancements in AI, particularly those with potential military applications. U.S. Commerce Secretary Gina Raimondo emphasized that the measures were not designed to stifle Chinese economic growth but to ensure the security of the U.S. and its allies. She highlighted the potential military applications of these chips, stating that they could be "used for military uses and modernization."
The new regulations will also likely affect chips sold by other tech giants, including Intel and AMD. Furthermore, semiconductor manufacturing equipment from companies like Applied Materials, Lam, and KLA could also come under the purview of these restrictions.
Despite the tightening regulations, consumer products such as game consoles and smartphones will remain unaffected. However, if the chips used in these devices exceed certain performance benchmarks, companies might be required to inform the Commerce Department about their orders.
Secretary Raimondo was keen to point out that these new measures would only impact a fraction of the chip exports to China. She stated, "The fact is China, even after the update of this rule, will import hundreds of billions of dollars of semiconductors from the United States."
The new rules will undergo a 30-day public notice period before being officially implemented.
