The U.S. Department of Commerce announced on Tuesday its plans to block the sale of advanced artificial intelligence chips to China in the upcoming weeks. This move aims to close loopholes that emerged after last year’s restrictions on AI chip exports came into effect.
The news of the new rules caused chip stocks to decline on Tuesday. Nvidia closed down approximately 5%, while Broadcom and Marvell slipped about 2% and 1%, respectively. AMD’s shares fell over 1%, whereas Intel closed down about 1.4%.
Previously, the restrictions prohibited the sale of Nvidia H100 chips, the preferred processors for U.S. AI companies like OpenAI. Instead, Chinese firms were able to purchase a slightly slower version called the H800 or A800, which adheres to U.S. regulations by reducing the on-device connection speed, also known as an interconnect.
The new rules will also ban the sale of these chips, according to senior administration officials during a briefing with reporters.
The restrictions may also impact the chips sold by Intel and AMD. Moreover, other rules are likely to hinder the sale and export of semiconductor manufacturing equipment from companies like Applied Materials, Lam, and KLA to China.
These restrictions will cut off a significant and growing market for AI semiconductors, raising concerns that China may retaliate against U.S. companies conducting business in the country.
Nvidia seems to have anticipated these restrictions and stated in August that they would not have an immediate material effect on earnings but might have long-term consequences.
In an SEC filing, Nvidia confirmed that the restrictions apply to various chips, including A100, A800, H100, H800, L40, L40S, and RTZ 4090. It also mentioned that it would impact complete systems sold with these chips, such as DGX and HGX systems. Nvidia also expressed concerns that the restrictions may affect the company’s ability to develop new products on schedule.
The goal of these U.S. restrictions is to prevent China from accessing advanced semiconductors that could contribute to breakthroughs in artificial intelligence, especially those with military applications, according to U.S. Commerce Secretary Gina Raimondo.
Senior administration officials clarified that the U.S. will limit the export of data center chips if they surpass a performance threshold set in October or if they exceed a new performance density threshold measured in flops per square millimeter.
Companies seeking to export AI chips to China or other embargoed regions will need to notify the U.S. government.
Additionally, officials stated that the U.S. plans to expand the list of semiconductor manufacturing equipment subject to restrictions.
However, consumer product chips, like those used in game consoles or smartphones, will not be subject to export controls, although companies may have to inform the Commerce Department about their orders if the chips meet certain speed requirements.
The U.S. government is also closing loopholes related to shipping chips to companies based in China or other embargoed regions such as Macao, to prevent a situation where a foreign subsidiary purchases chips and then ships them to China.
Raimondo assured that the new restrictions will only impact a small fraction of chip exports to China, emphasizing that China will still import billions of dollars worth of semiconductors from the United States.
The rules will undergo a 30-day public notice period before they go into effect, according to U.S. officials.
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— CNBC’s Kristina Partsinevelos contributed reporting.
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