Nvidia Corporation nvda Faces Turbulence As Us Plans Additional Ai Chip Restrictions for China

NVIDIA Corporation (NVDA) Faces Turbulence as US Plans Additional AI Chip Restrictions for China

NVIDIA Corporation (NASDAQ: NVDA) and other tech stocks experienced a decline due to concerns that Washington might close loopholes in the sale of powerful chips used for AI training to China. The potential closure of these loopholes could impact sales in China, which is the world’s top semiconductor market.

NVIDIA, which generates a significant portion of its revenue from China, saw its stock drop by as much as -4.63% in the pre-market trading session. Advanced Micro Devices (AMD), a rival chipmaker, also fell about 4%. China’s AI-related stocks were also affected, with Inspur Electronic Information Industry Co. and Unisplendour Corp., key hardware suppliers, experiencing a 10% drop.

NVIDIA had previously designed less-capable chips that did not require a license for export to China. However, the Wall Street Journal reported that Washington is considering expanding restrictions to include these lower-powered semiconductors.

This move reflects the Biden administration’s efforts to contain China’s technological progress and may contribute to increased tensions between the two countries. The US is particularly concerned about China’s technological advancements in AI, including its military and scientific applications.

While this development may negatively affect NVIDIA and AMD’s business in China, they continue to lead the market in AI development, attracting investments from companies worldwide. Major players like Microsoft, Baidu, and OpenAI rely on their products to train the next generation of AI services.

In addition to chip sales, US officials are also considering restrictions on cloud services leased to Chinese AI companies. Amazon and Microsoft, two major cloud service providers, could be impacted if these restrictions are implemented.

NVIDIA is currently the dominant player in the market for data center accelerator chips, with over 80% market share. These chips, known as AI accelerators, are specialized graphics processors designed for training AI models. They outperform general-purpose CPUs due to their architecture’s ability to handle parallel work in huge volumes. NVIDIA’s early adoption and development of GPUs for AI tasks gave them a significant advantage over competitors like AMD and Intel Corporation (INTC).