Recent United States export controls have put Nvidia, one of the leading AI companies, in a difficult situation. The new regulations could force Nvidia to cancel billions of chip orders from China for the coming year, potentially stalling Chinese tech giants’ progress in AI.
The immediate impact of export controls
Nvidia, based in Santa Clara, California, had already completed deliveries of AI chips to China this year. According to According to the Wall Street Journal, they even planned to expedite some 2024 orders before the new rules took effect in mid-November. However, a sudden announcement from the US government made these new export restrictions immediate, catching Nvidia off guard.
Major Chinese technology companies, including Alibaba Group, ByteDance and Baidu, had placed large orders for next year. In fact, orders for these tech giants for 2024 have exceeded $5 billion. With the new regulations in place, these ordinances are now at risk.
Despite the challenges, an Nvidia spokesperson said the company was reallocating its advanced AI computing systems to customers outside of China. They believe that the new export controls will not have a significant impact on them in the short term. However, Nvidia CFO Colette Kress expressed concerns about the long-term implications of Chinese restrictions for the US chip industry.
China’s dependence on Nvidia’s AI chips
Nvidia’s AI chips, known for their advanced capabilities, are globally recognized and used. Their chips play a central role in popular AI tools, such as OpenAI’s ChatGPT. The company’s prominence in the AI sector has significantly increased its sales and stock value, even reaching a valuation of $1 trillion earlier this year.
Following the US government’s imposition of softer restrictions on chips last year, Chinese companies had placed orders for Nvidia A800 and H800 chips, suitable for the Chinese market. However, under stricter rules announced on October 17, Nvidia must now either cancel these orders or obtain US export licenses.
The wider implications for China’s AI ambitions
The latest restrictions could slow China’s progress in AI. With the new rules covering most high-performance AI chips from Nvidia as well as Intel and Advanced Micro Devices, Chinese companies may have to find alternative solutions. Some have already started sourcing local chips, such as Huawei Technologies’ Ascend 910. However, US regulations have prevented major foundries like TSMC from producing large numbers of these chips.