New rules will limit the sale of more advanced chips like A800 and H800 from the American company Nvidia, whose shares fell approximately 5% following Tuesday's announcement.
The U.S. Department of Commerce announced on Tuesday that it plans to prevent the sale of more advanced artificial intelligence chips to China in the coming weeks.
The U.S. government claims that these new rules are intended to close loopholes that emerged after last year's restrictions on the export of artificial intelligence chips.
Stocks of chip-manufacturing companies fell on Tuesday on this news. Nvidia's shares fell by about 5%, while shares of Broadcom and Marvell fell by approximately 2% and 1%, respectively. AMD shares dropped by more than 1%, and Intel shares closed down approximately 1.4%.
These previous restrictions prohibited the sale of Nvidia's H100, which is the preferred processor for American artificial intelligence companies like OpenAI. Instead, Chinese companies were able to purchase a slightly slower version called H800 or A800, which complies with U.S. restrictions, primarily by slowing down the device's interconnect speed.
Top administration officials stated during a press briefing that the new rules will also ban these chips.
The restrictions may also affect chips sold by Intel and AMD. Other rules are likely to hinder the sale and export of semiconductor manufacturing equipment to China from companies such as Applied Materials, Lam, and KLA.
The restrictions cut across a large and growing market for artificial intelligence semiconductors and may raise concerns that the Chinese government will take economic countermeasures against American companies doing business in the country.
Nvidia appears to have anticipated these restrictions and stated in August that they would not have an immediate significant impact on revenue but could be detrimental in the long term.
"We comply with all applicable rules while working on providing products that support thousands of applications across various industries," a Nvidia spokesperson told CNBC. "Given the demand for our products worldwide, we do not anticipate a significant impact on our financial results in the short term."
On Tuesday, Nvidia stated in an SEC filing that the restrictions apply to the company's chips A100, A800, H100, H800, L40, L40S, and RTX 4090. The company also claimed that this affects entire systems sold with these chips, including DGX and HGX systems. Nvidia stated that the restrictions may impact its ability to complete the development of new products on schedule.
The aim of the U.S. restrictions is to prevent China from accessing advanced semiconductors that could contribute to breakthroughs in artificial intelligence, especially for military purposes, according to U.S. Commerce Secretary Gina Raimondo during a phone call with reporters. U.S. officials stated that they are not aimed at harming China's economic growth.
Top administration officials say that the U.S. will simply restrict the export of data center chips if they exceed the performance threshold set last October or exceed a new performance density threshold measured in flops per square millimeter.
Companies wishing to export artificial intelligence chips to China or other embargoed regions will need to notify the U.S. government.
Top officials in the administration also said that they plan to expand the list of semiconductor manufacturing equipment subject to U.S. restrictions.
Chips for consumer goods such as gaming consoles or smartphones will not be subject to export controls, although companies may need to report their orders to the Department of Commerce if the chips are fast enough.
The U.S. government is also closing loopholes related to the supply of chips to companies headquartered in China or other embargoed regions like Macao, to prevent a situation where a foreign subsidiary purchases chips and then ships them to China.
Raimondo stated that the new restrictions will only affect a small portion of chip exports to China.
"These rules, even after this rule update, will allow China to import semiconductors from the U.S. to the tune of hundreds of billions of dollars," Raimondo said.
According to U.S. officials, the rules will be available for public notification for 30 days and then go into effect.