US authorities order Nvidia to suspend sales of top AI chips to China

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

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Aug 31 (Reuters) – Chip designer Nvidia Corp said on Wednesday U.S. officials had told it to stop exporting two cutting-edge computer chips for artificial intelligence work to China, a move which could cripple the ability of Chinese companies to perform advanced operations. work like image recognition and hamper a business Nvidia expects to generate $400 million in sales this quarter.

Nvidia shares fell 4% after hours. The company said the ban, which affects its A100 and H100 chips designed to speed up machine learning tasks, could interfere with the completion of development of the H100, the flagship chip announced by Nvidia this year.

Shares of Nvidia rival Advanced Micro Devices (AMD.O) fell 2% after hours. An AMD spokesperson told Reuters it had received new licensing requirements that will prevent the export of its MI250 artificial intelligence chips to China, but it believes its MI100 chips will not be affected. AMD said it doesn’t believe the new rules will have a significant impact on its business.

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Nvidia said U.S. officials told it the new rule would “address the risk of covered products being used or diverted to a ‘military end-use’ or ‘military end-user’ in China.”

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

Without U.S. chips from companies such as Nvidia and rival Advanced Micro Devices (AMD.O), Chinese organizations won’t be able to cost-effectively perform the kind of advanced computing used for image recognition and speech, among many other tasks.

Image recognition and natural language processing are common in consumer apps such as smartphones that can respond to queries and tag photos. They also have military uses such as searching satellite images for weapons or bases and filtering digital communications for intelligence gathering purposes.

AMD did not immediately respond to request for comment.

Nvidia said it recorded $400 million in sales of the affected chips to China this quarter, which could be lost if Chinese companies decide not to purchase alternative Nvidia products. He said he planned to seek exemptions from the rule but had “no assurance” that US authorities would grant them.

Stacy Rasgon, financial analyst at Bernstein, said the disclosure indicated that around 10% of Nvidia’s data center sales, which investors have watched closely in recent years, came from China and the impact on sales was probably “manageable” for Nvidia.

“It’s not the (investment) thesis that changes, but it’s not a good look,” Rasgon said. “What happens on both sides now is the question,” he said of possible escalations in the future.

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Reporting by Eva Mathews in Bengaluru; Editing by Devika Syamnath and David Gregorio

Our standards: The Thomson Reuters Trust Principles.

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