The Biden administration updated its export control regulations for artificial intelligence (AI) chips on Oct. 17, with plans to prevent companies like NVIDIA from exporting advanced AI chips to China. NVIDIA shares plunged nearly 5%, AMD shares plunged more than 2%, and Intel shares fell 1.7% after the news was announced.
Under the latest rules, NVIDIA’s exports of chips to China, including the A800 and H800, will be affected. The new rules will take effect after 30 days of public comment.
NVIDIA responded to CBN, “We comply with all applicable regulations while striving to provide products that support thousands of applications across a variety of industries. Given the global demand for our products, we do not expect (the new regulations) to have a material impact on our financial results in the near term.”
The restrictions will also affect chip sales to China by companies such as AMD and Intel, with chip equipment makers including Applied Materials, Panarin Group and KLA also implicated. This is due to the fact that the new measures expand the licensing requirements for exporting advanced chips to more than 40 other countries outside of China, and introduce licensing requirements for chip manufacturing tools for 21 countries outside of China, expanding the list of equipment that is prohibited from entering those countries.
In addition, the new measures aim to prevent companies from bypassing chip restrictions through Chiplet’s chip stacking technology.
U.S. Commerce Secretary Gina Raimondo said the new measures are intended to “close loopholes,” and indicated that they will likely be updated at least annually in the future. The new restrictions will affect only a small portion of chip exports to China,” she said. Chips used in consumer products such as game consoles or smartphones will not be subject to export controls.
Last October, the U.S. imposed bandwidth rate restrictions on AI chips exported to China, involving NVIDIA’s A100 and H100 chips. Since then, NVIDIA has offered Chinese companies alternative versions of the A800 and H800. some Chinese computer makers have gone public with details that the H800 servers are identical in every way to the H100 chips sold elsewhere in the world, except for a reduced transfer rate of 400GB per second.
Despite U.S. export restrictions that have fueled concerns about NVIDIA’s chip access to the Chinese market, NVIDIA’s business is still surging in terms of earnings reports. This has been driven by demand for big AI model development so far this year.
Earnings for the quarter ended July 30 showed that NVIDIA’s net profit for the quarter reached a record $6.7 billion, a year-on-year surge of 422%; revenues also surged 171% year-on-year to $13.5 billion; the company’s gross profit margin increased by more than 25 percentage points over the same period last year, reaching 71.2%.
NVIDIA will announce its fiscal third-quarter earnings next month, and the company expects that third-quarter revenue will be about $16 billion, well above analysts’ expectations.