The race in Artificial Intelligence sets the United States against China

As the global contest for supremacy in artificial intelligence (AI) continues to intensify, the United States appears to be contemplating new measures to solidify its lead. These would primarily involve imposing limitations on the export of AI chips to China. This strategy aims not only to maintain control over the AI landscape but also to alleviate concerns regarding potential military uses of this technology. A report by the Wall Street Journal suggests that the US Commerce Department is considering the suspension of AI chip exports from major producers like Nvidia and Advanced Micro Devices (AMD) to Chinese clientele, possibly as soon as July.

This looming proposal has instigated a slump in the stock market, primarily affecting chip manufacturers. Nvidia's shares experienced a drop of over 2% following the disclosure of the news, and Advanced Micro Devices saw their shares decrease by around 1.5% in extended trading.

The race in Artificial Intelligence sets the United States against China

The White House's internal discussions mirror their worries about China's advancing AI technology and the ensuing national security implications. Through imposing more stringent trade limitations, the US intends to retain its position at the forefront of AI technology and thwart Beijing's attempts to harness it for military objectives.

Companies like Nvidia, Micron, and AMD are inadvertently drawn into the growing discord between China and the Biden administration. Just last year, Nvidia complied with a US government request to stop exporting two superior AI-specific computing chips to China. As a result, the company launched the A800 chip within the Chinese market to align with export control rules. Moreover, Nvidia also adjusted its flagship H100 chip earlier this year to stay compliant with the changing regulatory framework.

However, the new limitations under consideration by the US Commerce Department could stretch further, perhaps even outlawing the sale of A800 chips without an exclusive US export license. Should these measures be put into effect, the operations and earnings of chip manufacturers trading in both the US and Chinese markets could be severely disrupted.

The ongoing commerce discord between the two countries remains a hurdle for businesses within the semiconductor sector. Given the persistent geopolitical anxieties, industry stakeholders are keeping a close watch on the evolving situation and bracing for potential disruptions to the global supply chain.

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