The Biden administration is considering further restrictions on China’s access to critical technology, including restricting sales of high-end artificial intelligence chips, according to five people familiar with the deliberations.
The restrictions would restrict the sale of advanced chips from companies like Nvidia, Advanced Micro Devices and Intel to China, which are needed for the data centers that run artificial intelligence.
Biden officials said China’s artificial intelligence capabilities could pose a national security threat to the United States by bolstering Beijing’s military and security apparatus. Concerns include the use of AI to wield weapons, conduct cyber warfare and power facial recognition systems used to track dissidents and minorities.
But such restrictions would be a blow to semiconductor manufacturers, including those in the United States, which still derive much of their sales from China.
The Wall Street Journal had previously reported on the deliberations. Shares of Nvidia ended Wednesday down 1.8 percent after reports of a possible export crackdown. The company has been a key beneficiary of the artificial intelligence craze, and its stock price has soared about 180 percent this year.
Such additional restrictions, if passed, would not have an immediate impact on Nvidia’s financial results, Colette Kress, Nvidia’s chief financial officer, said in a call to reporters on Wednesday. In the longer term, however, they would “result in a permanent loss of opportunities for US industry to compete and lead in one of the world’s largest markets,” she said. She added that China typically generates 20 to 25 percent of the company’s data center revenue, which includes other products in addition to chips that enable AI
Chipmakers Qualcomm and Intel fell less than 2 percent on Wednesday, while AMD fell 0.2 percent.
Intel declined to comment, as did the Department of Commerce, which is responsible for export controls. AMD did not respond to a request for comment.
Limiting sales of high-end chips would be the latest step in the Biden administration’s campaign to starve China of advanced technology needed to power everything from self-driving cars to robotics.
Last October, the government imposed sweeping restrictions on the types of advanced semiconductors and chip-making machines that can be shipped to China. The rules were applied across the industry, but had particularly severe consequences for Nvidia. The company, an industry leader, was barred from selling its top-of-the-line A100 and H100 chips – capable of running the many processes needed to build artificial intelligence – into China unless it received prior notice a special license.
In response to these limitations, Nvidia began offering the downgraded A800 and H800 chips in China last year.
The contemplated additional restrictions, which would be introduced as part of the finalization of these earlier rules, would also prohibit the sale of Nvidia’s A800 and H800 chips, as well as similar advanced chips from competitors such as AMD and Intel, unless those companies had Obtaining a license from the Department of Commerce will continue shipping to the country.
The deliberations have sparked an intense lobbying battle, with Intel and Nvidia working to prevent further restrictions on their business.
Chip companies say that foreclosure from a key market like China would severely hurt their revenues and reduce their ability to spend on research and innovation of new chips. In an interview with the Financial Times last month, Nvidia CEO Jensen Huang warned that the US tech industry faces “tremendous damage” if it is cut off from trade with China.
The Biden administration has also debated internally where to draw the line on chip sales to China. Their goal is to limit the technological capabilities that could help the Chinese military wield weapons, develop autonomous drones, conduct cyber warfare, and power surveillance systems, while minimizing the impact of such rules on private companies.
The move, which would come at a time when the United States is also considering expanding restrictions on US investment in Chinese tech companies, is also likely to anger the Chinese government. Biden officials have been working in recent weeks to improve bilateral ties after clashes with Beijing erupted earlier this year after a Chinese surveillance balloon flew over the United States.
Secretary of State Antony J. Blinken traveled to Beijing this month to meet with his counterparts, and Treasury Secretary Janet L. Yellen is also expected to visit China soon.
Speaking on Wednesday at the Council on Foreign Relations in New York, Mr Blinken said China’s concern that the US wanted to slow its economic growth was “a longer part of the conversation we just had in Beijing”.
Chinese officials, he said, believe the US “wants to hold them back globally and economically.” But he denied this notion.
“How is it in our interest to give them access to technology that they can use against us?” he asked, citing China’s expanding nuclear weapons program, development of hypersonic missiles and use of artificial intelligence “possibly for repressive purposes.”
“If they were in our place, they would do exactly the same thing,” he said, adding that the US would introduce “very targeted, very narrowly defined controls.”
Nvidia’s rating had soared given the recent boom in generative artificial intelligence services that can create complex written answers to questions and images based on a single prompt. Microsoft has partnered with OpenAI, which makes the chatbot ChatGPT, to generate results on its Bing search engine, while Google has developed a competing chatbot called Bard.
As companies struggle to integrate the technology into their products, there has been a growing demand for chips like Nvidia’s that can handle these complex computing tasks. This momentum has helped push Nvidia’s market cap to over $1 trillion, making the company the sixth-largest company in the world by value.
Nvidia said in a filing in August that $400 million in revenue from “potential sales to China” could be subject to US export restrictions, including sales of the A100, if “customers choose not to purchase the company’s alternative product offerings.” or the government fails to grant licenses to allow the company to continue selling the chip in China.
Since the restrictions were imposed, Chinese chipmakers have tried to overhaul their supply chains and tap domestic sources for advanced chips, but China’s ability to manufacture the most advanced chips lags behind that of the United States by many years.
Dan Wang, visiting scholar at Yale Law School, said the impact of advanced chip restrictions on Chinese tech companies is uncertain.
“Most of their business needs are driven by less advanced chips, as fewer of them operate on the fringes of the most advanced AI,” he said.
Joe Rennison and Don Clark contributed coverage.