The Biden administration’s latest bid to curb China’s access to the most advanced AI models and AI chips could have a major impact on the AI boom and its enablers, most prominently chip giant Nvidia.
Nvidia’s shares fell about 2.6% in afternoon trading Monday. Other chip-maker and tech-company stocks traded lower on Monday, including Microsoft, whose shares fell about 1% and Apple, which was down about 1.3%.
The restrictions, which rolled out Monday, put caps on how many chips can be exported to more than 120 countries around the world that are neither very close American allies nor U.S. adversaries. They also included provisions that could require the largest U.S.-headquartered tech companies to do most of their AI computing in the U.S.
The curbs could hurt a strategy Nvidia calls “sovereign AI,” latching on to a trend where countries invest in domestic computing infrastructure to retain local control over the fast-developing technology. Many countries in the crosshairs of the regulations are pursuing sovereign AI, a business Nvidia said last year could bring in almost $10 billion of revenue.
“The most significant impact from these new restrictions appears to be on ‘sovereign AI’ opportunities, particularly in the Middle East where large pools of funding have been earmarked for AIinfrastructure projects,” UBS analysts said in a note.
Nvidia’s sales of chips it developed for the Chinese market could also be halted because the regulations require a U.S. license for all such shipments. UBS estimated those sales at $6 billion this year.
Analysts at Citi also said in a note that a limitation of around 50,000 advanced AI chips to many countries and a stipulation that U.S. companies locate no more than 7% of their AI computing power in a single country not closely allied to the U.S. could impact the company’s sales.
The depth of the impact on Nvidia and other tech companies remains largely unknown, however, because the new restrictions don’t take effect for about four months, and could be modified following a comment period. The incoming Trump administration could also modify or do away with them.