US authorities order Nvidia to suspend sales of top AI chips to China

September 1 (Reuters) – Chip designer Nvidia Corp (NVDA.O) said on Wednesday that U.S. officials told him to stop exporting two leading computer chips for artificial intelligence work to China, a move that could cripple the ability of Chinese companies to do advanced work like reconnaissance image and hinder Nvidia’s activities in the country.

The announcement signals a major escalation in the US crackdown on China’s tech capabilities as tensions boil over the fate of Taiwan, where chips for Nvidia and nearly every other major chip company are made.

Nvidia shares fell 6.6% after hours. The company said the ban, which affects its A100 and H100 chips designed to speed up machine learning tasks, could interfere with completing development of the H100, the flagship chip it announced this year.

Shares of rival Advanced Micro Devices Inc (AMD.O) fell 3.7% after hours. An AMD spokesperson told Reuters it had received new licensing requirements that will prevent the export of its MI250 artificial intelligence chips to China, but it believes its MI100 chips will not be affected. AMD said it doesn’t believe the new rules will have a significant impact on its business.

Nvidia said U.S. officials told it the new rule “will address the risk that products may be used or diverted to a ‘military end-use’ or ‘military end-user’ in China.”

The US Commerce Department would not say what new criteria it has set for artificial intelligence chips that can no longer be shipped to China, but said it is reviewing its China-related policies and practices to ” prevent advanced technologies from falling into the wrong hands”.

“While we are unable to outline specific policy changes at this time, we are taking a comprehensive approach to implementing additional actions necessary related to technologies, end uses, and end users to protect U.S. national security. and foreign policy interests,” a spokesperson told Reuters.

China’s Foreign Ministry reacted on Thursday by accusing the United States of trying to impose a ‘technology blockade’ on China, while its Commerce Ministry said such actions would undermine the stability of global supply chains. .

“The United States continues to abuse export control measures to restrict exports of semiconductor-related items to China, which China strongly opposes,” the ministry spokesperson said. of Commerce, Shu Jieting, at a press conference.

This is not the first time that the United States has decided to stifle the supply of chips from Chinese companies. In 2020, the administration of former President Donald Trump banned vendors from selling chips made using American technology to tech giant Huawei without a special license.

Without American chips from companies like Nvidia and AMD, Chinese organizations won’t be able to cost-effectively perform the kind of advanced computing used for image and speech recognition, among many other tasks.

Image recognition and natural language processing are common in consumer apps such as smartphones that can respond to queries and tag photos. They also have military uses such as searching satellite images for weapons or bases and filtering digital communications for intelligence gathering purposes.

Nvidia said it recorded $400 million in sales of the affected chips this quarter in China, which could be lost if companies decide not to purchase alternative Nvidia products. He said he plans to seek exemptions to the rule.

Stacy Rasgon, financial analyst at Bernstein, said the disclosure indicated that about 10% of Nvidia’s data center sales came from China and the sales impact was likely “manageable” for Nvidia.

“It’s not the (investment) thesis that changes, but it’s not a good look,” Rasgon said. “What happens on both sides now is the question.”

Nvidia last week forecast a sharp drop in revenue for the current quarter due to a weaker gaming industry. He said he expected third-quarter sales to fall 17% from the same period last year.

Reporting by Eva Mathews and Nivedita Balu in Bengaluru, Stephen Nellis and Jane Lee in San Francisco, Karen Freifeld in New York and Alexandra Alper in Washington, Eduardo Baptista in Beijing; Additional reporting by Beijing Newsroom; Editing by David Gregorio, Matthew Lewis and Kim Coghill

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