Report of US AI chip curbs triggers tech stock sell-off
A REPORT that Washington could close loopholes in the sale of powerful chips used for training artificial intelligence (AI) triggered declines in US tech stocks.
The US Commerce Department will stop the shipments of chips made by Nvidia – the world’s most valuable chipmaker – and other chip companies to customers in China as early as July, the Wall Street Journal reported.
Earlier this year, Nvidia designed less-capable chips falling under thresholds that require a licence from the Commerce Department before export to China or other countries of concern. Citing anonymous sources, the report said Washington is now weighing action as soon as next month to expand the curbs to include those lower-powered semiconductors.
Such a move underscores the Biden administration’s determination to contain China’s technological rise and could stoke tensions between the two countries. The US is increasingly concerned about Beijing’s technological ambitions, including around the use of AI in military and scientific advances that could tilt the geopolitical balance.
The sell-offs were led by Nvidia, which gets about a fifth of its revenue from China. It slid as much as 4.6 per cent in pre-market trading in New York on Wednesday (Jun 28). Its rival Advance Micro Devices (AMD) also fell, by about 3.7 per cent. The two companies lead the market for chips that are vital to the development of generative AI models, such as OpenAI’s ChatGPT.
In China, traders unloaded a slew of AI-related stocks, pushing Inspur Electronic Information Industry and Unisplendour – both key hardware suppliers – down 10 per cent.
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While the curbs would likely hurt Nvidia’s and AMD’s business with the world’s second-biggest economy, the two chipmakers remain at the forefront of a surge in AI development, which is driving investment from the US to Europe and China. From Microsoft to Baidu and OpenAI, companies around the world are buying their products to train the next generation of AI services.
US officials are also weighing whether to restrict the leasing of cloud services to Chinese AI companies, which have employed such platforms in training their models, the Wall Street Journal reported, citing people familiar with the discussions. Amazon and Microsoft are among the world’s biggest cloud service providers.
“Chinese AI firms may also be able to source dedicated AI chips from third party countries. So I think it will be hard for US to enforce the regulations,” said Robert Lea, an analyst at Bloomberg Intelligence. “While further restrictions could delay AI developments by Chinese firms, I don’t see a major long-term impact as Chinese firms taken an increasingly innovative approach to workarounds.”
Nvidia has a market share of more than 80 per cent for so-called data-centre accelerator chips. It had been operating under rules introduced last August, which required approval for shipments to China of its A100 and new H100 parts. A month later, the company said those restrictions would cost it US$400 million that quarter.
The chipmaker was able to partially alleviate the impact on its finances by selling a modified version of the A100 that is slower at accessing data, and therefore did not trigger the restriction.
An AI accelerator is a graphics processing unit (GPU) tailored to train AI models by feeding them tonnes of data. It is better suited for such tasks than a general-purpose central processing unit, because its architecture can do parallel work in huge volumes. Nvidia was the first to come up with a language to make GPUs perform AI tasks, giving it a huge head start over rivals including AMD and Intel.
AMD was also subject to last August’s initial rules, but emerged largely unscathed by the clampdown.
The report “may have hurt sentiment today,” said Vey-Sern Ling, managing director at Union Bancaire Privee.
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