Hardware computer technology company Nvidia had $5 billion worth of advanced chips with AI capabilities it intended to sell to China halted due to new export controls the United States imposed on such products.
Nvidia had already delivered orders of the advanced AI chips to China and was pursuing 2024 pre-orders before the new rules were announced, which were said to be set for implementation in mid-November. But last week, the U.S. told Nvidia the ruling was effective immediately.
The company may need to cancel the orders or sell them elsewhere. A Nvidia spokesman said the company has been working to reallocate products to customers in the U.S. Sources spoken to by the Wall Street Journal said TikTok owner ByteDance and cloud-computing companies Alibaba Group and Baidu were also impacted by the ruling.
The Nvidia spokesperson promised it would not affect sales in the short term.
WSJ News Exclusive: Nvidia may need to find new buyers for billions of dollars worth of advanced chips originally destined for China, following a move by Washington to halt shipments there https://t.co/Y9LkCdjSWM
— The Wall Street Journal (@WSJ) October 31, 2023
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Valuetainment previously reported on the new sanctions, which were imposed earlier in October with an announcement from U.S. Department of Commerce Secretary Gina Raimondo. The blockages were designed to thwart China’s ability to learn from America’s superior technology and fuel their AI programs. The concern was not primarily one of economic advantage but rather militaristic, as the chips can be utilized by the People’s Liberation Army (PLA).
After the news broke, Nvidia shares dropped by about 5 percent and performed second to worst on the S&P 500 for the day. Advanced Micro Devices (AMD) and Intel declined by about 1 percent each.
China was outraged at the news, criticizing them as “improper” and saying that it will thwart technological progress. The new law “violate[s] international trade rules and “seriously threaten[s] the stability of industrial supply chains,” the Chinese Commerce Ministry reportedly said.
As covered in a recent Valuetainment video, Patrick Bet-David explained how China is heavily dependent on the rest of the world for advanced microchips. Its perceived competitive advantage in domestic manufacturing is not applicable here, as its chip production is mostly limited to cheaper products.
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