US Orders NVIDIA, AMD to Restrict Sales of Advanced AI Chips to China

The US Commerce Department was reportedly reviewing its export-related policies regarding China, and the new restrictions were intended to keep advanced technology out of the “wrong hands,” in order to protect American security and foreign policy interests.

The US government has imposed a new “license requirement” on the sale of high-end graphics processors and artificial intelligence accelerators to China and Russia, a move which would restrict the sales of chips to the two countries.

The government decision affects the business interests of Nvidia Corp and Advanced Micro Computing (AMD) Inc, two major California-headquartered AI chip manufacturing companies with significant dealings with Beijing.

A Securities and Exchange Commission (SEC) filing by Nvidia Corp on Wednesday said that the government order, dated August 26, came into effect “immediately.” The filing said the license requirement would impact the sales of A100-class circuits to Beijing as well as delay the development of upcoming H100 integrated circuits.

“The USG indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a military end use or military end user in China and Russia. The Company does not sell products to customers in Russia,” it said.

The New York Times said the AI chips covered under the new export restrictions have military applications in weapons development and surveillance. According to reports, the export restrictions would also affect the ability of Chinese companies to carry out cost-effective computing used for image and speech recognition.

An AMD Inc spokesperson told Reuters that the new rules would force it to stop the sales of M1250-class AI chips to China, while the sale of MI100 chips would remain unaffected.

Nvidia has said that it was involved in discussions with the US government on “exemptions” to the new export rule so that it could continue its “internal and support development activities” in China.

It said that it might have to move some of its operations out of China following the new government order.

The SEC filing said that the company has offered alternative products which are not covered under the export restrictions to its Chinese customers.

The American chip-making company said potential sales of up to $400 million to China could be affected if the government doesn’t grant it exemptions from the new rule, per the stock exchange filing.

The new export restrictions were announced days after the US Commerce Department implemented controls on the export of advanced chip design software to China which would prevent Chinese entities from developing advanced AI chips domestically.

A note by the US Commerce Department said at the time that the four technologies covered under the export controls have military applications in the development of hypersonic weapons.

The restrictions on the sale of American technology to China were announced in the wake of growing tensions between the two nations over US House Speaker Nancy Pelosi’s visit to Taiwan in the first week of August.

Beijing accused the US of violating China’s sovereignty and doubled down on its commitment to “reunify” Taiwan following the controversial trip.

The People’s Liberation Army (PLA) conducted its biggest-ever “live fire” and ballistic missile drills in six regions around Taiwan in response to Pelosi’s visit, which were described as “destabilizing” by the US and its partners.