As tensions brew between the United States and China—two 21st century superpowers that seem to be racing toward the brink of war—Nvidia’s stock price is today’s collateral damage.
On Tuesday, The Wall Street Journal reported that the federal government is weighing a heavier ban on exports of artificial intelligence chips to China, according to sources familiar with the situation. In a matter of weeks, the Commerce Department could block shipments of chips sold by Nvidia and Advanced Micro Devices (AMD)—two leading U.S.-based AI chipmakers jockeying for industry supremacy—that were headed for the East.
Wall Street shed shares of Nvidia on the news. Its stock price fell nearly 3% after last night’s closing bell, and its competitor AMD’s price fell nearly 2%.
Other American chipmakers, including Qualcomm, Intel, and IBM, are down slightly, ranging between a fraction of a percent to over 2%, as of midday Wednesday.
Chipmaker stocks have generally risen in the past year alongside the boom in generative AI hype, with Nvidia’s shares up 189% since January.
However, as China’s aspirations grow on the world stage and its purchasing power multiplies, the keepers of Silicon Valley’s most sophisticated technologies, which sought to enrich themselves in China’s lucrative economy, are also becoming caught in a country-wide battle as the U.S. government braces for China’s great march forward.
The new chip-sales ban would tighten the government’s restrictions from October, which already cut off China’s supply of Nvidia and AMD’s most advanced tech, on fears of what China could develop with AI’s godlike potential.
But the chipmakers themselves, lured by the promise of Chinese buyers’ wealth, worked to circumvent those rules. Months after they were announced, Nvidia, led by Taiwanese American cofounder Jensen Huang, said it would manufacture a watered-down version of its top chip for the Chinese market. Called the A800, it maxed out below the performance thresholds set by the U.S. government.
Now, new rules could stop Nvidia from purveying the A800, or other versions of its chips that it tweaked to comply with past regulations, in China or Hong Kong without a license, sources told the Journal.
The Commerce Department did not immediately reply to a request for comment from Fast Company.
With more furious crossfire between the United States and China inflaming a Pacific trade war, one of Nvidia’s biggest markets, which contributes 20% of its revenue, is further at risk—and investors are taking note. The A800 was especially popular, with companies from Baidu to ByteDance ordering boxes of them, sources told the Financial Times. (According to a recent report from Reuters, Nvidia’s flagship A100 chip, the target of the October ban, could still be found in China’s underground markets for double the price at $20,000 apiece. Meanwhile, Chinese surveillance groups “rented” A100 chips from third parties.)
Across the ocean, Chinese AI stocks dove as much as 10% on concerns that the country is facing a dearth of AI super-chips. Even tech titans Alibaba and Tencent, which boast many tentacles within AI’s reach, took a slight dip.
Nvidia’s chips are used to drive the world’s premier AI tech, including OpenAI’s ChatGPT and Alphabet’s Bard chatbot, and can be used to engineer anything from hypersonic missiles to nuclear weapons. Cybersecurity threats from Beijing, whether through espionage or joint-project ventures, have already been identified by U.S. officials as one of the gravest threats to national security, as tensions near their boiling point.
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