Nvidia stock was hard hit by news the US government has imposed new restrictions on exports of its cutting edge chips to customers in China. Shares dropped 11% to $133.46 Thursday, eliminating more than $40 billion in market value, before regaining some losses Friday to close at $136.47.
The US imposed the export restrictions on two of Nvidia’s most advanced computing chips designed for artificial intelligence applications, the H100 and A100. The move by Washington occurs against a backdrop of growing unease with China’s technological advancement, as well as tensions over the independence of chip-manufacturing-hub Taiwan, amid Chinese threats of a military takeover.
CFRA Research analyst Angelo Zino said, “On the surface, it looks like the U.S. government is looking to refrain from sales of next generation advanced chips, 7 nanometers and below, specifically for military end use in China.”
The government also asked Nvidia-competitor Advanced Micro Devices Inc (AMD.O) to refrain from chip exports to China.
The specific chips targeted by Washington are used for Artificial Intelligence and machine-learning applications, such as training modules for complex tasks like natural language processing. Such training modules also have military application in such areas as modeling bomb simulations for nuclear weapons development, and designing weapons.
Analysts note, shutting off the flow of chips will impact a vast swath of Chinese companies, including, Alibaba Group Holding Ltd (9988.HK), Tencent Holdings Ltd (0700.HK), Baidu Inc , and Huawei Technologies Co Ltd [RIC:RIC:HWT.UL].
Nvidia has argued the restrictions may hinder its development of its flagship H100 chip, which it had hoped to begin shipping later this year.
However later on Thursday, the company announced the US government has waived the restrictions temporarily, allowing tech transfers and exports, as needed, to complete the development of the H100 chip. The company was also allowed to perform any exports required to support US customers of the A100, through March 1, 2023.
Nvidia was also cleared to ship orders of the chips made through its Hong Kong facility until September of 2023.
All Chinese customers will still have to procure licenses from the United States, to acquire the technology.
