Nvidia stock falls after Biden administration releases updated export rule for AI chips


Nvidia (NVDA) stock fell nearly 2% on Monday after the Biden administration published an updated export rule aimed at controlling the flow of artificial intelligence chips to “adversaries” like China.

The White House said the rule would limit the number of AI chips called GPUs (graphics processing units) which can be ordered in most countries without a special license. Small orders of 1,700 GPUs or less would not count toward the export cap.

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“Artificial intelligence is quickly becoming essential to both security and economic strength,” the White House said in a statement Monday. “The United States must act decisively to lead this transition by ensuring that American technology underpins the global use of AI and that adversaries cannot easily abuse advanced AI.”

Some 18 “key” US allies, including the UK, Netherlands and Taiwan, will face no restrictions on shipments of AI chips, and 24 countries subject to arms controls – such as China, North Korea and Russia – will still face an outright ban on receiving exports of the latest AI chips.

The main significance of the updated restrictions lies in capping the computing capacity of a given group of AI chips that can be shipped to other countries around the world.

Under the rule, U.S. companies could ship AI chips with total processing power equal to about 50,000 Nvidia Hopper chips or 20,000 of its latest Blackwell chips, Bernstein analyst Stacy Rasgon said. Countries subject to this cap include U.S. allies like Switzerland and Israel.

For reference, Microsoft (MSFT) alone would have purchased 485,000 GPU Hopper from Nvidia in 2024, while Meta (META) has purchased 224,000 AI chips, according to the Financial Times.

The rule aims to close loopholes in previous AI chip export restrictions in 2022 and 2023 “by thwarting contraband” and “elevating AI safety standards,” the White House said.

“[These restrictions] will make it even more difficult for Chinese entities to purchase the most advanced NVIDIA chips,” DA Davidson analyst Gil Luria told Yahoo Finance in an email Monday.

“While there have already been some restrictions on chip sales, reports indicate that advanced NVIDIA chips are arriving in China, likely due to NVIDIA’s limited control over its resellers.” Luria explained in a previous email last week.

In addition to Nvidia’s advanced chips sold through resellers, Nvidia manufactures specific versions of chips that comply with current U.S. trade restrictions on China. Sales of Nvidia’s H20 chips – its Hopper chips for China – should not be affected by the controls,” Rasgon wrote in the memo.

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