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US imposed new restrictions on exports to China for cutting-edge chips from NVIDIA Corporation. These new restrictions have indicated an upsurge of the US crackdown on the technological capability of Beijing. The latest move also alarmed investors already upset regarding an industry plunge. On Thursday, the shares of NVIDIA dropped 11% to $133.45.

The move wiped out at least $40 billion in market value. It also dragged down the Philadelphia SE Semiconductor Index by around 4%. The Washington administration banned exports of 2 top computing chips for artificial intelligence of NVIDIA, the A100, and H100. On Wednesday filing mentioned that the recent move could harm the business of Chinese companies in the key market.

The recent US action came as tensions increased over the future of Taiwan and access to the latest chip technology. Keep in mind that the country is a key source for NVIDIA and almost all other major semiconductor firms. It seems like the US administration is seeking to strain sales of next-gen 7 nanometers and below advanced chips.

The US Government Recently Targeted NVIDIA and AMD Chips

The CFRA Research analyst Angelo Zino said China is using these types of chips for its military use. The competitor AMD (Advanced Micro Devices Inc.) was also asked to immediately stop exports of AI chips to China. Moreover, the Washington administration has now targeted NVIDIA and AMD chips used for machine learning and AI. These chips are also used to build training modules for critical tasks including natural language processing.

These modules are more beneficial for military purposes such as designing weapons and modeling bomb simulations. However, the market researchers said these types of actions can critically hit the investment cover of Chinese tech companies. These Chinese companies include Huawei Technologies Co Ltd, Alibaba Group Holding Ltd, Baidu Inc., and Tencent Holdings Ltd.

The Ban Could Interrupt the Development of NVIDIA H100 Chips

On Wednesday, NVIDIA also said the recent move will interrupt the development of its flagship chip H100. However, the H100 chip is expected to ship later this year. The company announced on Thursday that the US government has allowed exports and tech transfer. It was essential for the company to finalize the development of the H100 flagship chips.

Meanwhile, the US administration has also authorized the company to continue essential exports to support US customers of A100 chips. The approval will expire on March 1, 2023. The company can also complete orders of the chips using its facility in Hong Kong till September 1, 2023. Chinese companies still need to obtain licenses for the technology from the US government.

AMD Has Stopped Exports of its Advanced M1250 AI Chips

However, AMD hasn’t yet confirmed whether the company has received similar approval. Experts said the US government has stopped exports of some advanced chips to China. The move will harm various tech companies running public clouds or advanced AI training modules in the country. The chipmaker NVIDIA has now stopped exports to China of its top 2 computing chips for AI work.

Meanwhile, AMD also received new license requirements. The company will stop exports to China of its advanced AI chip M1250. On Thursday, a spokesperson for the Chinese Commerce Ministry, Shu Jutting, issued a statement. He said Beijing condemns the move as it undermines the rights of Chinese companies. The recent action also threatened the disruption of global supply chains.