The simmering rivalry between the U.S. and China, two of the world’s most formidable tech superpowers, is casting a shadow over Nvidia’s stock performance. As reported on Tuesday, a possible crackdown on artificial intelligence (AI) chip exports to China is currently under consideration by the U.S. federal government.
Under this potential move, exports of chips from U.S.-based AI titans Nvidia and Advanced Micro Devices (AMD) may soon hit a roadblock. A chilling effect is already being felt in Wall Street, with Nvidia’s stock falling nearly 3% and AMD’s dropping close to 2%. Other U.S. chipmakers including Qualcomm, Intel, and IBM have also seen their shares drop.
This downturn comes despite the surge in chipmaker stocks over the past year, riding on the wave of growing enthusiasm around AI, with Nvidia’s shares escalating a whopping 189% since January.
The U.S.’s move to tighten regulations comes in response to China’s growing global aspirations and burgeoning purchasing power. While U.S. tech companies hoped to cash in on China’s booming economy, they now find themselves caught in the crossfire as the U.S. government tightens its belt in response to China’s advancements.
Last October, restrictions were imposed on China’s access to Nvidia and AMD’s top-tier tech, spurred by concerns about the potential applications of AI’s near-limitless capabilities. However, the promise of the lucrative Chinese market prompted companies like Nvidia to find workarounds, offering modified versions of their chips that complied with the new regulations.
Now, the possibility of a total ban could jeopardize Nvidia’s ability to offer the A800 or any other tweaked chips in China or Hong Kong without a license.
The intensifying U.S.-China rivalry is putting one of Nvidia’s major markets at risk. China contributes 20% of Nvidia’s revenue, and its A800 chips have found favor among numerous Chinese companies. Consequently, these mounting geopolitical tensions have investors on high alert.
Meanwhile, across the Pacific, the possibility of an AI super-chip shortage has seen Chinese AI stocks plummet as much as 10%. Even tech giants like Alibaba and Tencent, heavily invested in AI, experienced a dip.
Nvidia’s chips power some of the world’s most advanced AI technology, including OpenAI’s ChatGPT and Alphabet’s Bard chatbot, with applications ranging from hypersonic missiles to nuclear weapons. This places them in the spotlight of the brewing U.S.-China tech battle, with implications for global AI technology development and the future of the AI chip industry.