U.S. Considers Tightening of AI Chip Export Restrictions to China
The United States federal government is reportedly contemplating further restrictions on exporting sophisticated AI computing chips to China.
The potential new restrictions could have a significant impact on Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD). The Biden administration has already enforced stringent controls, compelling Nvidia to manufacture a toned-down version of its flagship A100 for the Chinese market. However, the impending rules might prohibit the export of even this diminished chip, the A8001. This policy change, if executed, could significantly impact the strategies of Nvidia and AMD, both of which manufacture powerful processors extensively used in AI applications.
Effects on the Stock Market
The mere report of potential new restrictions has triggered a slight tremor in the stock market. Shares of Nvidia and Advanced Micro Devices fell by more than 2% in early trading. Nvidia’s shares eventually closed down 3.8% for the week on Thursday.
AMD shares managed to pare back some losses by the end of the day. Other chipmakers, including Marvell Technology (NASDAQ: MRVL), Broadcom (NASDAQ: AVGO), and Qualcomm (NASDAQ: QCOM), also experienced a dip in their shares in response to the news.
Cloud-Based Computing Companies Also in the Crosshairs
Notably, the anticipated restrictions are not confined to chipmakers alone. They are also expected to apply to companies offering cloud-based computing solutions, which have been previously utilized by some firms to circumvent export controls.
Tightened Chip Export: Fuel to U.S. & China Trade Tensions
The potential tightening of chip export controls surfaces against the backdrop of escalating competition between the U.S. and China over hardware and software technology. It’s important to note that cybersecurity threats from Chinese state-backed entities have been recognized by top U.S. officials as one of the major national security threats facing the United States. There have been allegations of sensitive technology theft from American companies to benefit Chinese domestic competitors, either through outright industrial espionage or through joint-venture projects. Hence, the intensified chip export controls could exacerbate trade tensions between the two nations.
Nvidia, AMD, & Bureau of Industry and Security: Silent on the Situation
As of now, Nvidia, AMD, and the Bureau of Industry and Security, the export control unit of the Commerce Department, have not commented on the situation. The investing world, along with the concerned companies, will be closely watching the developments in this scenario.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
