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Nvidia's $1 Trillion Blow: US Puts Brakes on AI Chip Exports to China

The rising tension between the U.S and China keeps impacting the technology industry worldwide. Among those concerned by this on-going conflict is Nvidia, a leading chipmaker.
REUTERS/Rick Wilking Showing Nvidia CEO Jensen Huang
REUTERS/Rick Wilking Showing Nvidia CEO Jensen Huang
July 8, 2023 11:25 am

Nvidia, who achieved a HUGE market capitalization of $1 trillion in May, is widely recognized for its top-tier GPUs and AI chips.

GPUs, or Graphics Processing Units, play a big role for displaying graphics on electronic devices and are in high demand worldwide.

Ever since ChatGPT was brought to the public and AI has become the center of attention, the demand for GPU's have vastly increased. This is mainly because they play an essential role for AI’s training and learning algorithms.

The new export controls are particularly targeting Nvidia's A800 chip, a product born out of necessity after previous trade restrictions, to ensure the company could continue its sales activities in China.

Any attempt to stifle sales of this chip could inhibit Nvidia’s ability to conquer one of the world’s largest markets. China is crucial for Nvidia, accounting for 22% of the company's revenue last year.

All of this is part of the US Government’s new tech strategy, which is supposed to further constrict the sale of certain advanced AI chips to China. That’s not to prevent China from playing video games, but to limit Beijing’s access to key military-grade technology. 

According to their statement released on Wednesday, Nvidia anticipates a permanent loss of opportunities for all industries, given the US tightened restrictions on exporting AI chips to China.

The news was followed by a wave of reactions throughout the global market, especially in China.

Numerous Chinese AI stocks reported considerable losses: Inspur Electronic Information Industry dropped by 10%, Chengdu Information Technology of Chinese Academy of Sciences slid 12%, and Baidu sank 4.4%.

Analysts believe that these chip restrictions could have a significant impact on China's rapidly advancing tech industry. The potential absence of Nvidia's GPU ecosystem could mean a significant drop in efficiency and an overall increase in cost for Chinese tech businesses.

The GPU producer is not the only one hit by the US-China tech standoff. Earlier this year, Beijing banned Chinese companies that operate important information systems from buying products from Micron Technology.

Many people see this as China's response or "payback" for the sanctions put on China's computer chip industry by Washington and its partners.

Overall, an intensification of tech export restrictions by the US Government might significantly reshape tech industry dynamics. It highlights the ongoing power struggle in technology and AI between the world's two largest economies. Further developments on this front will definitely affect all tech companies operating globally and the vice versa of technology incorporated into everyday life.

As economists pointed out, Chinese firms risk not only losing access to advanced chips but also to technology and tools that would let China compete on a global stage for advanced tech.

Beijing didn’t respond to these sanctions yet, but according to experts, the scenario seems to be just the beginning of a drawn-out tech war. And the potential impact isn't limited to businesses only. Specific circumstances could lead to numerous resignations among American leaders at Chinese tech firms, potentially leaving a leadership gap.

Interestingly, China, as the world's leading semiconductor importer, is at risk as the Biden administration might be counting on this vulnerability to reclaim technological leadership. While tech tensions rise and additional sanctions threaten, the worldwide fight for tech supremacy is preparing for an intense new stage.

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Written by Marei Schiffmann
Marei, a linguistics enthusiast, recently joined the Gold Penguin team as a writer. During her studies on multilingual communication, she discovered her true calling in the world of writing. She developed a keen fascination for AI and technological advancements. As a result, her writing primarily focuses on delivering the latest news in the realm of artificial intelligence.
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