US officials order Nvidia to halt sales of its best AI chips to China

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

Aug 31 (Reuters) – Chip designer Nvidia Corp (NVDA.O) He said on Wednesday that US officials had asked it to stop exporting two of its top computing chips for AI work to China, a move that could cripple Chinese companies’ ability to carry out advanced work such as image recognition and hamper Nvidia’s business in China.

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

Shares of Nvidia’s competitor Advanced Micro Devices Inc (AMD.O) It fell 3.7% after hours. An AMD spokesperson told Reuters that the company had received new licensing requirements preventing the export of MI250 AI chips to China but believed that the MI100 chips would not be affected. AMD said it does not believe the new rules will have a material impact on its business.

Nvidia said US officials have told it that the new rule will “address the risk of covered products being used or converted to ‘military end-use’ or ‘military end-use’ in China.”

In response to a request for comment, the US Commerce Department declined to specify new standards it had set for AI chips that can no longer be shipped to China, but said it was reviewing its policies and practices regarding China that “keep advanced technologies out of the wrong hands.”

“Although we are not in a position to identify specific policy changes at this time, we are taking a comprehensive approach to implement the necessary additional measures related to technologies, end uses and end users to protect the national security of the United States and foreign policy interests,” a Reuters spokesperson told Reuters.

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

Without US chips from companies like Nvidia and AMD, Chinese organizations would not be able to cost-effectively implement 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 applications such as smartphones that can answer queries and tag images. They also have military uses such as searching satellite images for weapons or bases and filtering digital communications for intelligence gathering purposes.

Nvidia said it booked sales of $400 million of affected chips this quarter to China that could be lost if Chinese companies decide not to buy Nvidia’s replacement products. She said she intended to apply for exceptions to the rule but had “no assurance” that US officials would grant it.

Stacy Rasgon, a financial analyst with Bernstein, said the disclosure indicated that about 10% of Nvidia’s data center sales, which have been closely watched by investors in recent years, came from China and that the damage to sales was likely “manageable” for the company. Nvidia.

“It’s not a shifting (investment) thesis, but it’s not a good outlook,” Rasgon said. “What happens to both sides now is the question,” he said of possible future escalation.

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

Additional reporting by Eva Matthews and Nevdita Balu in Bengaluru, Stephen Niles and Jane Lee in San Francisco, Karen Freifeld in New York, Alexandra Alper in Washington; Editing by David Gregorio and Matthew Lewis

Our criteria: Thomson Reuters Trust Principles.