New US restrictions on Nvidia AI chip sales to China trigger massive sell-off

The logo of technology company Nvidia is seen at its headquarters in Santa Clara, California February 11, 2015. REUTERS/Robert Galbraith/File Photo

September 1 (Reuters) – New restrictions on Nvidia Corp’s cutting-edge chip exports to China signaled an escalating U.S. crackdown on Beijing’s technological prowess and alarmed investors already worried about a industry downturn.

Nvidia shares fell 11% to $133.46 on Thursday, wiping out more than $40 billion in market value and driving the Philadelphia SE Semiconductor Index (.SOX) down more than 4%.

The U.S. decision to restrict exports of two of Nvidia’s key computer chips for artificial intelligence — the H100 and A100 — to China could hurt the company’s business in the key market, a filing says released Wednesday. Read more

Washington’s action comes as tensions mount over access to advanced chip technology and the future of Taiwan, where Nvidia and nearly every other major semiconductor company sources chips.

“On the surface, it appears the US government is seeking to refrain from selling advanced next-generation chips, 7 nanometers and below, specifically for military end use in China,” said CFRA Research analyst Angelo Zino.

Rival Advanced Micro Devices Inc (AMD.O) was also asked on Wednesday to stop AI chip exports to China.

The Nvidia and AMD chips targeted by Washington are being used for AI and machine learning applications, specifically building training modules for tasks such as natural language processing.

These modules could also be useful to the military for modeling bomb simulations and designing weapons.

Market watchers say the restrictions are likely to hit a slew of Chinese tech firms, including Alibaba Group Holding Ltd (9988.HK), Tencent Holdings Ltd (0700.HK), Baidu Inc and Huawei Technologies Co Ltd. [RIC:RIC:HWT.UL].

Nvidia also said Wednesday that the move could interfere with development of its flagship H100 chip, which is expected to ship later this year.

On Thursday, he announced that the US government had authorized the exports and technology transfers needed to complete development of the H100 chip. U.S. officials have also cleared the company to make the necessary exports to provide support to U.S. A100 customers through March 1, 2023.

The company was also allowed to fulfill chip orders through its Hong Kong facility until September 1, 2023. (https://bit.ly/3Q5YfhR)

Chinese customers still need to obtain U.S. government licenses for the technology, an Nvidia spokesperson said.

AMD did not respond to a request for comment on whether it had received similar clearance.

Reporting by Akash Sriram, Yuvraj Malik and Tiyashi Datta in Bengaluru, additional reporting by Noel Randewich, writing by Ankur Banerjee; Editing by Aditya Soni

Our standards: The Thomson Reuters Trust Principles.