NVIDIA Corporation (NASDAQ:NVDA)) shares were pointing down in Monday’s early premarket deals amid reports of a tighter US ban on AI chip exports to China.
The market’s favorite AI play saw its share fall around 2.4% lower, to $488.88, as the Biden administration is preparing to tighten existing export controls limiting Chinese access to semiconductors that power artificial intelligence (AI) technology.
Tougher sanctions were first rumoured last week, when it was discovered that Chinese companies were skirting existing export controls via a web of overseas units.
Sources suggested to Reuters that NVIDIA’s H800 chip, a simplified version of the company’s cutting-edge H1000 chip developed to comply with restrictions enacted last October, is likely to be banned from shipping to China.
California-based semiconductor designer NVIDIA previously said it would comply with any further US restrictions.
The Biden administration first enacted semiconductor export controls last year to curb the Chinese government’s use of AI in military equipment.
According to latest reports, the fresh wave of export controls aims to reduce the speed at which AI chips ‘speak’ to each other; an essential metric considering that AI models are trained using thousands of chips working simultaneously with each other.
Without world-class domestic semiconductor expertise, China is reliant on US microchips developed by NVIDIA, AMD and others.
NVIDIA’s H1000 and the related A1000 chips are the gold standard for training large-language AI models such as ChatGPT. Limiting access to even the hobbled 800 series would put China at a considerable disadvantage on the global AI stage.
Strengthening existing export controls also risks souring already chilly relations between the two countries. US officials have forewarned China of the plans to mitigate a political fallout.
The Biden administration is expected to make an announcement on the matter this week.