Plunging shares: Jensen Huang, co-founder and chief executive officer of Nvidia, speaks during an event in Taipei. The company’s stock fell 4.7% to US$439.38 in New York, marking the biggest single-day drop since Aug 9. — AFP
NEW YORK: Nvidia Corp suffered its worst stock decline in more than two months after the Biden administration stepped up efforts to keep advanced chips out of China, a campaign that includes restricting the company’s sale of processors designed specifically for the Chinese market.
Nvidia warned that the new rules could hinder product development and cause other difficulties, though the changes aren’t likely to take a financial toll in the short term.
The latest regulations, announced Tuesday, also limit exports to two Chinese artificial intelligence (AI) chip firms that are seen as rivals to US-based Nvidia.
The rules – aimed at preventing China from accessing cutting-edge technology with military uses – cast a cloud over Nvidia shares and other US chip stocks.
Nvidia fell 4.7% to US$439.38 in New York, marking the biggest single-day drop since Aug 9. The stock had more than tripled this year before the pullback, fuelled by the AI boom. The company makes the most popular AI accelerators, processors that help sophisticated algorithms handle massive amounts of data.
The tighter controls will target Nvidia’s A800 and H800 chips, a senior US official said, which the American firm created for export to China – the world’s largest market for chips – after the Biden administration introduced its initial restrictions last October.
“We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries,” Nvidia said in an emailed statement.
“Given the demand worldwide for our products, we don’t expect a near-term meaningful impact on our financial results.”
In a regulatory filing later in the day, Nvidia said that the restrictions “may impact the company’s ability to complete development of products in a timely manner, support existing customers of covered products, or supply customers of covered products outside the impacted regions.”
As part of the new rules, the Biden administration added two Chinese AI chip startups – Shanghai Biren Intelligent Technology Co and Moore Threads Intelligent Technology Beijing Co – and their subsidiaries to a trade restriction list.
It mandates that companies obtain a US government license before shipping to those firms.
Biren said that it’s strongly opposed to the ruling and has urged the Commerce Department to review its decision.
Chinese Foreign Ministry spokeswoman Mao Ning said Monday at a regular press briefing in Beijing that her nation opposed “the United States politicising, instrumentalising and weaponising trade and tech issues.”“US restrictions on Nvidia’s A800 and H800 series tailored for the Chinese market were expected, given recent company commentary.
“A recent surge in orders from large Chinese customers indicates stockpiling of 800-series chips in anticipation of such restrictions, pulling sales forward.
Though the restrictions won’t greatly affect short-term estimates, they can erode Nvidia’s long-term prospects,” said Bloomberg Intelligence technology analyst Kunjan Sobhani.
The new rules also require companies to notify the United States government before selling chips that fall below the controlled threshold, as Bloomberg reported earlier.
Top-of-the-line chips are best for powering AI models, a senior administration official said. But with a lot of money and a little jury-rigging, a whole class of slightly inferior chips could also be used for AI and supercomputing and therefore pose a national security risk, the official said.
The United States wants to monitor that so-called gray zone activity, the official added, while declining to comment on the specific parameters of which chips will be affected.
The administration will review company notifications within 25 days, the official said, to determine whether firms need a licence to sell those chips to China.
“It’s difficult to draw a bright line between military and commercial technology,” US Commerce secretary Gina Raimondo told reporters ahead of publication of the rule.
“There are often dual-use technologies – and the same technologies that fuel commercial exchange, unfortunately, sometimes can also allow our competitors to modernise their military, surveil their citizens and solidify oppression.”
But the United States doesn’t want to be more restrictive than necessary, Raimondo said, emphasising a consistent message from the Biden administration that Washington doesn’t seek to hurt China’s economy.
Washington relented in one key area following a year of public comment on the initial rule: The updated curbs broadly allow the sale of advanced commercial chips to Chinese companies for use in consumer products like smartphones, computers and electric vehicles, as Bloomberg reported earlier.
But the Biden administration will restrict the most advanced consumer chips – like those used in AI data centres – and impose a notification process on a select number of varieties just behind the cutting edge.
The administration will also require firms to obtain a licence to sell chips to more than 40 countries that Chinese firms could use as intermediaries to skirt US controls. — Bloomberg
