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US officials order Nvidia to halt sales of top AI chips to China

US officials order Nvidia to halt sales of top AI chips to China

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

Chip designer Nvidia on Wednesday (Aug 31) said that US officials told it to stop exporting two top computing chips for artificial intelligence work to China, a move that could cripple Chinese firms' ability to carry out advanced work like image recognition and hamper a business that Nvidia expects to generate US$400 million in sales this quarter.

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

AMD shares were down 2 per cent in after hours trading. It makes similar artificial intelligence chips.

Nvidia said US officials told it the new rule "will address the risk that the covered products may be used in, or diverted to, a "military end use" or "military end user" in China".

The announcement signals a major escalation of the US crackdown on China's technological capabilities as tensions bubble over the fate of Taiwan, where chips for Nvidia and almost every other major chip firm are manufactured.

Without American chips from companies like Nvidia and its rival Advanced Micro Devices, Chinese organisations will be unable to cost-effectively carry out the kind of advanced computing used for image and speech recognition, among many other tasks.

Image recognition and natural language processing are common in consumer applications like smartphones that can answer queries and tag photos. They also have military uses such as scouring satellite imagery for weapons or bases and filtering digital communications for intelligence gathering purposes.

AMD did not immediately respond to request for comment.

Nvidia said it had booked US$400 million in sales of the affected chips this quarter to China that could be lost if Chinese firms decide not to buy alternative Nvidia products. It said it plans to apply for exemptions to the rule but has "no assurances" that US officials will grant them.

Stacy Rasgon, a financial analyst with Bernstein, said the disclosure signaled that about 10 per cent of Nvidia's data centre sales, which investors have closely monitored in recent years, were coming from China and that the hit to sales was likely "manageable" for Nvidia.

“It’s not (investment) thesis changing, but it’s not a good look,” Rasgon said. “What happens on both sides now is the question,” he said about possible escalations going forward.

Source: Reuters

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