Nvidia shares were hit by potential restrictions on chip exports to China

(BFM Bourse) – According to The Wall Street Journalthe US government is considering further restricting chip exports to China, which could hurt the graphics processor maker’s business.

A sword of Damocles now hangs over Nvidia, the graphics processor manufacturer. Its action is smoking this Wednesday on Wall Street, losing almost 3% at the start of the session, as well as its comparable AMD (-2.7%).

Due to the information reported by The Wall Street Journal overnight from Tuesday to Wednesday. The US daily reported that the Biden administration is considering new restrictions on the export of chips to China.

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Uncertain timing

Washington had already taken a first wave of measures in November, which then required companies to get the green light from the US Commerce Department to export the most advanced semiconductors to China. The aim is to slow the country’s progress in artificial intelligence (AI) technologies, especially in military and scientific applications, which are of course very geopolitically sensitive.

Nvidia then adapted by producing a version dedicated to the Chinese market of its AI chips, the A800, which fell below the minimum performance thresholds for which the restrictions applied, explains The Wall Street Journal.

This time, according to sources familiar with the matter interviewed by the daily, even the A800 would be affected. This chip could therefore no longer be exported to China without a blank check (a license) from the Ministry of Commerce.

The administration is also reportedly considering restricting the leasing of cloud computing services to Chinese AI companies, which have used such arrangements to circumvent a ban on the export of advanced chips, according to the report. The Wall Street Journal.

The timetable for the implementation of these measures remains uncertain. The Biden administration could avoid announcing them before the end of Treasury Secretary Janet Yellen’s trip to China to avoid offending Beijing.

The hit of the year on Wall Street

The balance is obviously not easy to find for Washington, which must combine the protection of critical technologies (and therefore of national security) with the need not to punish the operations of American groups too much. According to Bloomberg, about 20% of Nvidia’s revenue comes from China.

Remember, Nvidia remains the big box of the year on Wall Street, with an increase in its title of 180%. The company was driven by the market’s enthusiasm for generative artificial intelligence, the one at the heart of the ChatGPT conversational bot. This allowed the company to post stratospheric outlooks for its second quarter.

Nvidia dominates the market for graphics chips that are essential for generating advanced tasks and applications in artificial intelligence. Thus, Microsoft and Google equip themselves with thousands or even tens of thousands of Nvidia A100 graphics processors (GPUs) in their data centers to develop and train their chatbots, ChatGPT and Bard, respectively.

Julien Marion – ©2023 BFM Bourse

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