The Biden administration is reportedly considering imposing stricter sanctions on the export of artificial intelligence (AI) chips to China, citing concerns over potential weapon development and hacking activities. According to the Wall Street Journal (WSJ), the US Department of Commerce is seeking to update existing export controls introduced in October of last year.

As per the report by WSJ, if these measures are implemented, it could pose challenges for companies such as Nvidia and Advanced Micro Devices (AMD) in selling advanced chips to China.

Meanwhile, no specific timeline has been provided; it is believed that the Department of Commerce may take action as early as next month to halt chip shipments to China and other countries of concern without obtaining prior licenses.

The proposed restrictions come at a time when both the United States and China are actively competing to develop AI-accelerated hardware and secure patents to safeguard their technological innovations.

Moreover, these measures would significantly impact Nvidia's operations, as the company had designed new graphics processing unit chips, namely the A800 and H800, specifically for China as replacements for more advanced chips that were restricted under previous export regulations. Nvidia also modified its flagship H100 chip earlier this year to comply with the export rules. The report suggests that the new regulations would even prohibit the sale of A800 chips without a license.

Following the release of this report, Nvidia's shares experienced a decline of over 2%, while Advanced Micro Devices (AMD) saw a decrease of approximately 1.5%.

Nvidia's CEO, Jensen Huang, expressed concerns about the potential "enormous damage" that export controls could cause to the US tech industry in an interview with the Financial Times. Huang highlighted how these restrictions limited their ability to sell their most advanced chips to China, leaving them at a disadvantage.

It's important to note that Nvidia does not manufacture these GPU chips themselves but instead relies on contracts with manufacturers such as Taiwan Semiconductor Manufacturing and South Korea's Samsung Electronics.

Major buyers of AI chips include cloud computing services, with technology companies like Amazon and Microsoft utilizing these chips for their cloud computing needs.

Image source: Digitimes