Nvidia, AMD Shares Tumble As US Slaps Export Curbs on Top AI Chips To China: What's At Risk Here?

Shares of Nvidia Corporation NVDA and Advanced Micro Devices AMD came under significant pressure late Wednesday following news that the chipmakers were slapped with certain chip export restrictions to China.

What Happened:  Nvidia was informed by the U.S. government on Aug. 26 about a new license requirement for future exports of A100 and the forthcoming H100 chips to China, including Hong Kong, and Russia, the chipmaker revealed in a filing late Wednesday.

The new requirement is also applicable to any other systems incorporating those chips, as well as any future chips achieving comparable peak performance and chip-to-chip input/output performance, as well as systems including those circuits.

AMD has also been told by the U.S. to stop exporting its MI250 chips to China, Reuters reported, citing a company spokesperson.

Why It Matters: The move is intended to address the risk of these chips potentially being used by the military in China and Russia.

The A100, announced in 2020, is Nvidia’s chip that powers the highest-performing elastic data centers for AI, data analytics, and high-performance computing. It is based on its 7nm GPU architecture named Ampere. Meanwhile, the H100, announced at the 2022 GTC earlier this year, is the company’s first Hopper-based graphic processing unit.

Nvidia clarified in the filing that it does not currently sell products to customers in Russia.

See also: Nvidia Stock Falls After Q2 Earnings, Sales Miss: CEO Says 'We Will Get Through This'

What Nvidia Plans To Do:  Nvidia said it is in talks with the U.S. government to seek exemptions for its internal development and support activities. The company also said it has asked its Chinese customers to fulfill their planned or future purchases of its data center products with products not subject to the new licensing norms.

If a customer is particular about products covered by the new license requirement, Nvidia said it would apply for it but cautioned there is no assurance of success.

Q3 Outlook Clouded?  Nvidia also noted that its third-quarter guidance issued on Aug. 24 included about $400 million in potential sales to China, which may be subject to the new license agreement.

Price Action:  Nvidia slumped 6.56% to $141.04 in after-hours trading on Wednesday, while rival AMD fell 3.79% to $81.65, according to Benzinga Pro data. The iShares Semiconductor ETF SOXX was trading 2.03% lower at 362.30.