U.S. officials informed Nvidia that it now needs a government license to export higher level artificial intelligence (AI) chips to China, Russia, or Hong Kong.
The company revealed this information on Wednesday, prompting a stock selloff. It reportedly had $400 million in sales in products exceeding the performance capability stipulated by the government.
This move comes as the U.S. government seeks to limit Chinese technological development and may also be tied into tensions between the People’s Republic and Taiwan. The order covers two top computing chips that are believed necessary to advance Chinese AI capabilities.
Most of Nvidia’s chips and those of every other major provider are manufactured in Taiwan.
They are linked to image recognition, something security officials have raised red flags over concerning internal intelligence actions in the communist nation against ethnic and religious minorities.
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The company said its affected chips are the A100 and H100 designs, which are engineered to increase the speed of machine learning tasks. As its shares dropped, Nvidia officials said that the move could interfere with its newest H100 design’s development.
U.S. officials told the company that the new rule “will address the risk that products may be used in, or diverted to,” military and military end user applications in China.
The Department of Commerce would not comment specifically on the Nvidia move. It did, however, acknowledge that all of its policies related to China are under review in order to keep the most advanced technology away from “the wrong hands.”
Officials said that they are undertaking a “comprehensive approach” to protect both national security and “foreign policy interests.”
Meanwhile, China predictably reacted by accusing the U.S. of attempting a “technology blockade” of the communist nation. It also charged that the action will interfere with already strained global supply chains.
The move by the Biden administration follows a similar act under former President Donald Trump. The White House in 2020 blocked suppliers from selling chips manufactured with U.S. technology to Chinese giant Huawei without being granted a special license.