Nvidia Corp NVDA and rival semiconductor chip companies could be hit with one more embargo from the Biden administration to China to concentrate artificial intelligence technology development with allies and on Washington’s terms.
The Biden government weighed a fresh sanction on the export of AI chips used in data centers on both a country and company basis before passing the baton to the Republican government headed by Donald Trump on January 20, Bloomberg reports.
Washington could enact three tiers of chip curbs, Bloomberg reported, citing unnamed sources familiar with the matter.
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U.S. allies, including Germany, the Netherlands, Japan, South Korea, and Taiwan, can avail themselves of unrestricted access to American chips in the first tier, according to Bloomberg’s report.
U.S.-headquartered companies can apply for universal validated end-user designation after maintaining at least 50% of their total computing power on American soil.
Companies can deploy computing power, and firms headquartered apply for U.S. government permission to ship chips to data centers provided that only up to 25% of their total computing power is located outside of Tier 1 countries and up to 7% in any one Tier 2 country.
According to the report, countries under the second tier can ship maximum computing power to a nation of up to 50,000 graphic processing units from 2025 to 2027.
However, individual companies can expand their limits subject to VEU status in each country where they wish to build data centers.
The third, most restrictive tier affects China, Macau, Russia, and all countries where the U.S. maintains an arms embargo, Bloomberg noted. Shipments to data centers in those places are prohibited.
The U.S. sanctions will also limit the export of closed AI model weights. Companies cannot host robust closed model weights in Tier 3 countries.
Leading AI beneficiaries included Nvidia, Broadcom Inc AVGO, and Taiwan Semiconductor Manufacturing Co TSM, reaching trillion-dollar valuations in 2024.
The Biden government’s semiconductor sanctions intensified with the 2020 pandemic in China, which disrupted global semiconductor supply chains and triggered a semiconductor chip crisis.
The U.S. and other countries remain focused on ramping up their semiconductor base domestically to mitigate unwarranted disruptions. Previously, the U.S. canvassed its allies to restrict semiconductor exports to China, citing national security threats.
Semiconductor chip stocks experienced significant growth in 2024, driven by the AI boom that fueled the S&P 500 and Nasdaq indices to rise by 23%–29%.
A third of the world’s 10 companies with valuations exceeding $1 trillion in 2024 belonged to the chip industry.
Nvidia’s valuation crossed $3 trillion in 2024, as its GPUs became essential for developing AI models. Similarly, Broadcom remained propelled by demand for its custom chips from Big Tech giants.
Nvidia and Apple Inc AAPL supplier Taiwan Semiconductor advanced its production roadmap, remaining on course to manufacture 2nm chips in Taiwan and commercialize 4nm chips at its Arizona facility.
Nvidia had maintained a lack of impact from the semiconductor embargo. However, peer chip companies canvassed the government to go softer on their sanctions on China.
Price Action: NVDA stock closed lower by 0.02% at $140.11 Wednesday.
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