The introduction of new U.S. export controls may compel Nvidia (NASDAQ:NVDA) to cancel billions of dollars in orders for its advanced chips to China, according to a report in the Wall Street Journal.
This move could have significant implications, potentially depriving Chinese tech companies of crucial AI resources.
Nvidia shares fell 0.7% in early New York trading on Tuesday.
Nvidia had already completed its deliveries of advanced AI chips to China for this year and was attempting to expedite some 2024 orders before the new regulations were set to take effect in mid-November.
However, the U.S. government informed Nvidia in a letter that the export restrictions on high-end chips, including sales to China, were effective immediately.
Notably, major Chinese AI and cloud-computing companies such as Alibaba (NYSE:BABA) Group, ByteDance (the owner of TikTok), and Baidu (NASDAQ:BIDU) had placed substantial orders for delivery in the upcoming year. Orders from these companies for 2024 amounted to over $5 billion, according to WSJ.
These restrictions on AI chips are part of a broader effort by the Biden administration to restrict China's access to advanced chips, AI tools, and other technologies, with the aim of preventing China from advancing its military and cyberwarfare capabilities.