U.S. officials order Nvidia to halt sales of top AI chips to China

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Aug 31 (Reuters) – Chip designer Nvidia Corp (NVDA.O) said on Wednesday that U.S. officials told him to stop exporting two leading computer chips for artificial intelligence work to China, a move that could cripple the ability of Chinese companies to do advanced work like reconnaissance image and hamper Nvidia’s business in China.

Nvidia shares fell 6.6% after hours. The company said the ban, which affects its A100 and H100 chips designed to speed up machine learning tasks, could interfere with the completion of development of the H100, the flagship chip announced by Nvidia this year.

Shares of Nvidia rival Advanced Micro Devices Inc (AMD.O) fell 3.7% after hours. An AMD spokesperson told Reuters the company had received new licensing requirements that would prevent the export of its MI250 artificial intelligence chips to China, but it believes its MI100 chips will not be affected. AMD said it doesn’t believe the new rules will have a significant impact on its business.

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Nvidia said U.S. officials told it the new rule “would address the risk of covered products being used in or diverted to a ‘military end-use’ or ‘military end-user’ in China.”

Asked for comment, the US Commerce Department would not say what new criteria it has set for artificial intelligence chips that can no longer be shipped to China, but said it was reviewing its policies and practices related to China “to prevent advanced technologies from being mistaken”. hands.

“While we are unable to outline specific policy changes at this time, we are taking a comprehensive approach to implementing additional actions necessary related to technologies, end uses, and end users to protect U.S. national security. and foreign policy interests,” a spokesperson told Reuters.

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

The announcement signals a major escalation in the US crackdown on China’s tech capabilities as tensions boil over the fate of Taiwan, where chips for Nvidia and nearly every other major chip company are made.

Without American chips from companies like Nvidia and AMD, Chinese organizations won’t be able to cost-effectively perform the kind of advanced computing used for image and speech recognition, among many other tasks.

Image recognition and natural language processing are common in consumer apps such as smartphones that can respond to queries and tag photos. They also have military uses such as scrubbing satellite imagery for weapons or bases and filtering digital communications for intelligence gathering purposes.

Nvidia said it recorded $400 million in sales of the affected chips to China this quarter, which could be lost if Chinese companies decide not to purchase alternative Nvidia products. He said he planned to seek exemptions from the rule but had “no assurance” that US authorities would grant them.

Stacy Rasgon, financial analyst at Bernstein, said the disclosure indicated that around 10% of Nvidia’s data center sales, which investors have watched closely in recent years, came from China and the impact on sales was probably “manageable” for Nvidia.

“It’s not the (investment) thesis that changes, but it’s not a good look,” Rasgon said. “What happens on both sides now is the question,” he said of possible escalations in the future.

The chip ban comes as Nvidia already last week forecast a sharp decline in revenue for the current quarter due to a weaker gaming industry. Nvidia said it expects third-quarter sales of $5.90 billion, down 17% from the same period last year.

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Reporting by Eva Mathews and Nivedita Balu in Bengaluru, Stephen Nellis and Jane Lee in San Francisco, Karen Freifeld in New York and Alexandra Alper in Washington; Editing by David Gregorio and Matthew Lewis

Our standards: The Thomson Reuters Trust Principles.

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