Nvidia can't sell AI chips to China: US govt

San Francisco, Sep 1

The US government has ordered graphics chip giant Nvidia not to sell its artificial intelligence (AI) chips to China over national security concerns.

In a filing with the US Securities and Exchange Commission (SEC), Nvidia said the Joe Biden government told the company "about a new license requirement for future exports to China, including Hong Kong, to reduce the risk that the products may be used by the Chinese military".

Nvidia shares fell 6.5 per cent in extended trading on Wednesday after the news came out, reports CNBC.

The company expects the move will cost it $400 million in potential sales in China in the current quarter.

The new licensing rule also applies to sales to Russia, However, Nvidia said it doesn't have a market base there.

"We are working with our customers in China to satisfy their planned or future purchases with alternative products and may seek licenses where replacements aren't sufficient," a Nvidia spokesperson was quoted as saying.

Industry analyst Ming-Chi Kuo tweeted on Thursday that China leads the world in AI patent filing, "and US's restriction on AI chip sales would secure the US lead in the AI area".

"It is worth noting whether Chinese clients will directly/indirectly place rush orders to increase inventory to reduce the potential risk from US gov's possible expansion of sales restrictions. If so, that might benefit supply chain utilization rates in the short term," he mentioned.

Kuo said that the impact of the sales restriction on suppliers such as TSMC is limited, but investors worry that the US government "may expand restrictions on more chips which could affect more server-related or other products" and this "uncertainty could be a structural risk for the semiconductor sector".