Nvidia (NVDA) stock fell as much as 3% early Monday after the Biden administration release updated export rule with the aim of controlling the flow of artificial intelligence to “adversaries” such as China.
The White House said the rule would cap the number of AI chips called GPUs (graphics processing units) that can be ordered by most countries, without a special license, to 50,000. Smaller orders of 1,700 or fewer GPUs would not count towards the export cap. About 18 US allies, including the UK, the Netherlands, and Taiwan, will face no restrictions.
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“The United States must act decisively to lead this transition by ensuring that US technology underpins global AI deployment and that advanced AI cannot be easily abused by adversaries,” the White House said in a statement on Monday.
FYI, Microsoft (MSFT) only by all accounts bought 485,000 Nvidia Hopper GPUs only in 2024, while Meta (META) bought 224,000 of the AI chips, according to The Financial Times.
The rule aims to close loopholes in previous export restrictions on AI chips in 2022 and 2023 “by preventing smuggling” and “raising AI safety standards,” the White House said.
“While there have already been some restrictions on chip sales, there have been reports of advanced NVIDIA chips reaching China, likely due to the fact that NVIDIA has limited control over its resellers,” DA Davidson analyst Gil Luria told Yahoo Finance in a statement. email.
In addition to Nvidia's higher-end chips sold through resellers, Nvidia makes specific versions of chips that comply with current US trade restrictions on China. According to the FT, Nvidia's H20 chip – its Hopper chip for China – would not be subject to the new rule.
Nvidia's vice president of government affairs, Ned Finkle, said in a statement Monday that the rule “was drafted in secret and without proper legislative review.”
“And by seeking to rig market outcomes and stifle competition — the lifeblood of innovation — the Biden Administration's new rule threatens to squander America's hard-won technological advantage,” he said.
Companies have a longer period than the usual 120 days to comment on the restrictionsBloomberg reported, giving the Trump administration time to make changes to the rule, which will take effect in a year. Nvidia's statement included an apparent appeal to the incoming administration.
“As the Trump Administration first demonstrated, America wins through innovation, competition and by sharing our technologies with the world — not by retreating behind a wall of government overreach,” Finkle said. “We look forward to returning to policies that strengthen American leadership, strengthen our economy and preserve our competitive edge in AI and beyond.”