China’s New Export Rule Hits Chipmakers in the US

Chipmakers AMD and Nvidia have lost shares amid fears about US restrictions on selling artificial intelligence chips in China.

Nvidia states that the US government must issue a new licence immediately in order to reduce the risk of chips being used or diverted for military end uses in China or Russia.

There are concerns that the rule could cause millions of dollars in revenue loss. In New York after-hours trading, shares of both chipmakers fell. AMD’s shares declined 3.7%, while Nvidia’s share price fell by 6.6%.

Chinese officials strongly opposed the latest move. According to state media, the United States “acted against the principle of fair competition”, and violated international trade and economic rules.

Beijing released a statement saying that the US must immediately stop all wrongdoings, treat all companies around the globe fairly, including Chinese companies, and do more to promote stability in the world’s economy.

According to a spokesperson for the US Commerce Department, “We are taking an integrated approach to implement additional measures related to technologies and end-uses to protect US National Security and Foreign Policy Interests.”

“This includes preventing China from acquiring and using US technology within the context of its Military-Civil Fusion program to fuel its militarization efforts, conduct human rights violations, and enable other malign actions.”

Nvidia announced Wednesday that it would require a new license to export its A100 and H100 chips. These chips were designed to speed-up machine-learning tasks.

Nvidia said that China sales of US$400m could be affected (PS345.2m). Nvidia also stated that customers may not choose to purchase alternative product offerings from the company or if the US government refuses licenses or denies licenses to important customers.

Nvidia spokesperson said that Nvidia was in communication with customers in China to “satisfy their future or planned purchases of alternative products”.

An AMD spokesperson stated that the rules, which prevent the shipment of its MI250 chips into China, would not have any “material impact” upon business.

Following the invasion of the Ukraine in February, both AMD and Nvidia have stopped selling products to Russia.

Analysts suggested that China may find it harder to obtain chips for advanced computing because of US requirements.

Mario Morales from the International Data Corporation (IDC), a market intelligence firm based in California, indicated that this could have an impact on the earnings of US-based manufacturers AMD and Nvidia.

Mr Morales stated, “Both companies have a significant exposure to China” and that they could see greater impact going forward, especially in the event China decides to retaliate.

Surging Tensions

Nvidia reported US$6.7 Bn in revenue last week. This was significantly lower that forecasts. It said that its revenue from the data centre business (which produces computer chips) increased by 61% over the previous year.

“This is a really good shot at China. It’s going be a real spark to those geopolitical (tensions). Dan Ives of Wedbush Securities, claimed that Nvidia is caught in the crossfire. China and the United States have been at odds for years over technology and trade.

Tensions between two of the most powerful economies in the world rose after Nancy Pelosi’s controversial visit to Taiwan earlier this month.

China considers the self-governed island as a part its territory. China insists that it be united with China, by force if necessary.