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October 31, 2023
US export rules put Nvidia’s AI chip sales to China in jeopardy

Recent U.S. export controls have put Nvidia, a leading AI company, in a tight spot. The new regulations may force Nvidia to cancel billions in chip orders to China for the upcoming year, potentially stalling the progress of Chinese tech giants in the AI domain.

The immediate impact of export controls

Nvidia, based in Santa Clara, California, had already completed this year’s AI chip deliveries to China. According to The Wall Street Journal, they were even planning to expedite some 2024 orders before the new rules were set to take effect in mid-November. However, a sudden announcement from the U.S. government made these new export restrictions immediate, catching Nvidia off guard.

Major Chinese tech companies, including Alibaba Group, ByteDance, and Baidu, had placed significant orders for the next year. In fact, orders from these tech giants for 2024 surpassed $5 billion. With the new regulations in place, these orders are now in jeopardy.

Despite the challenges, an Nvidia spokesperson stated that the company is reallocating its advanced AI computing systems to customers outside of China. They believe that the new export controls won’t significantly impact them in the short term. However, Nvidia CFO Colette Kress expressed concerns about the long-term implications of Chinese restrictions for the U.S. chip industry.

China’s reliance on Nvidia’s AI chips

Nvidia’s AI chips, known for their advanced capabilities, are globally recognized and utilized. Their chips play a pivotal role in popular AI tools, such as OpenAI’s ChatGPT. The company’s prominence in the AI sector has significantly boosted its sales and stock value, even reaching a $1 trillion valuation earlier this year.

Following the U.S. government’s imposition of milder chip restrictions last year, Chinese companies had placed orders for Nvidia’s A800 and H800 chips, tailored for the Chinese market. However, under stricter rules announced on Oct. 17, Nvidia must now either cancel these orders or obtain U.S. export licenses.

The broader implications for China’s AI ambitions

The latest restrictions could slow down China’s advancements in AI. With the new rules covering most high-performance AI chips from not only Nvidia but also Intel and Advanced Micro Devices, Chinese companies might have to find alternative solutions. Some have already started sourcing local chips, such as Huawei Technologies’ Ascend 910. However, U.S. regulations have restricted leading foundries like TSMC from producing many of these chips.

The post US export rules put Nvidia’s AI chip sales to China in jeopardy appeared first on ReadWrite.

 

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