New US restrictions on Nvidia AI chips sales to China lead to sell-off

Tech company Nvidia logo is seen at its headquarters in Santa Clara, Calif., Feb. 11, 2015. REUTERS/Robert Galbraith/File Photo

Sept. 1 (Reuters) – New restrictions on exports of advanced chips from Nvidia Corp (NVDA.O) to China have signaled an escalation of the US crackdown on Beijing’s technological prowess and alarmed investors already worried about a downturn in the industry.

Shares of Nvidia fell 11% to $133.46 on Thursday, wiping out more than $40 billion in market value and the Philadelphia SE Semiconductor Index (.SOX) falling more than 4%.

The US’ move to restrict exports of two of Nvidia’s best artificial intelligence computer chips — the H100 and A100 — to China could hurt the company’s operations in its key market, according to a filing on Wednesday. read more

Washington’s move comes as tensions mount over access to advanced chip technology and the future of Taiwan, where Nvidia and nearly all other major semiconductor companies source their chips.

“On the surface, it appears that the US government is forgoing the sale of next-generation advanced chips, 7 nanometers and below, specifically for military end-use in China,” said Angelo Zino, an analyst at CFRA Research.

Rival Advanced Micro Devices Inc (AMD.O) was also asked on Wednesday to stop the export of AI chips to China.

The Nvidia and AMD chips that Washington is targeting are used for AI and machine learning applications, especially building training modules for tasks such as natural language processing.

These modules can also be useful to military personnel in bomb simulation modeling and weapon design.

Market followers say the restrictions are likely to affect a large number of Chinese tech companies, including Alibaba Group Holding Ltd (9988.HK), Tencent Holdings Ltd (0700.HK), Baidu Inc and Huawei Technologies Co Ltd. [RIC:RIC:HWT.UL].

Nvidia also said on Wednesday that the move could hinder development of its flagship H100 chip, which is expected to ship later this year.

On Thursday, it announced that the US government has authorized exports and technology transfers needed to complete development of the H100 chip. U.S. officials have also authorized the company to carry out the exports necessary to provide support to U.S. customers from A100 through March 1, 2023.

The company will also be allowed to fulfill orders for chips through its Hong Kong facility until September 1, 2023. (https://bit.ly/3Q5YfhR)

Chinese customers still need to obtain licenses from the US government for the technology, an Nvidia spokesperson said.

AMD has not responded to a request for comment as to whether it has received a similar authorization.

Reporting by Akash Sriram, Yuvraj Malik and Tiyashi Datta in Bengaluru, Additional Reporting by Noel Randewich, Writing by Ankur Banerjee; Editing by Aditya Soni

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