Shares in major computer chipmakers, including Nvidia and Advanced Micro Devices (AMD), saw a significant drop on Wednesday after Nvidia revealed that tighter U.S. government controls on exports of artificial intelligence (AI) chips would cost the company an additional $5.5 billion.
The U.S. Commerce Department’s new export licensing requirements, which will apply to Nvidia’s H20 integrated circuits and similar chips, are designed to mitigate risks that these products could end up in supercomputers in China. The controls are aimed at preventing the diversion of advanced AI chips, which have strategic value, to countries of concern, particularly China.
In a regulatory filing, Nvidia stated that the government’s decision to impose indefinite export restrictions on these high-performance chips will have a long-lasting impact on its business. The new licensing requirements are a response to concerns that the chips may be used in supercomputers that could potentially bolster China’s AI and military capabilities. This marks a significant development in the ongoing tech rivalry between the U.S. and China, with the U.S. continuing to tighten controls on technology exports to its rival.
The news of the export restrictions sent shares of both Nvidia and AMD tumbling. Nvidia’s stock dropped by 6% in morning trading, while AMD, a key competitor in the AI chip market, also saw a 6% decline. AMD, in its regulatory filing, estimated that the new export controls could cost it up to $800 million in potential charges related to inventory, purchase commitments, and reserves.
The announcement is expected to have a ripple effect throughout the tech industry, particularly in the AI sector. As the demand for AI-powered technologies continues to surge, particularly for training and deploying large language models, the new export controls could alter the competitive landscape for AI chipmakers. Analysts will be closely monitoring how these regulatory changes impact global supply chains and innovation in the rapidly growing AI market.
