US curbs AI chip exports from Nvidia to some Middle East countries

A smartphone with a displayed NVIDIA logo is placed on a computer motherboard in this illustration taken March 6, 2023. REUTERS/Dado Ruvic/Illustration/File Photo/File Photo Acquire Licensing Rights

Aug 30 (Reuters) – The U.S. expanded the restriction of exports of sophisticated Nvidia (NVDA.O) artificial-intelligence chips beyond China to other regions including some countries in the Middle East, the company said in a regulatory filing this week.

U.S. officials usually impose export controls for national security reasons. A similar move announced last year signaled an escalation of the U.S. crackdown on China’s technological capabilities, but it was not immediately clear what risks were posed by exports to the Middle East.

The company said the curbs, which affect its A100 and H100 chips designed to speed up machine-learning tasks, would not have an “immediate material impact” on its results.

In a separate statement, Nvidia said the new licensing requirement “doesn’t affect a meaningful portion of our revenue. We are working with the U.S. government to address this matter.”

The U.S. Commerce Department, which normally administers new licensing requirements on exports, did not immediately return a request for comment.

Last September Nvidia rival Advanced Micro Devices (AMD.O) also said it had received new license requirements that would halt exports of its MI250 artificial-intelligence chips to China.

Nvidia, AMD and Intel (INTC.O) have since then all disclosed plans to create less powerful AI chips that can be exported to the Chinese market.

Nvidia, which gave no reason for the new restrictions in the filing dated Aug. 28, last year said U.S. officials informed them the rule “will address the risk that products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China.”

Nvidia this week did not specify which countries in the Middle East were affected. The company derived most of its $13.5 billion in sales in its fiscal quarter ended July 30 from the United States, China and Taiwan. About 13.9% of sales came from all other countries combined, and Nvidia does not provide a revenue breakout from the Middle East.

“During the second quarter of fiscal year 2024, the USG (U.S. government) informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East,” Nvidia said in the Aug. 28 filing.

Last year’s announcements came as tensions bubbled over the fate of Taiwan, where chips for Nvidia and almost every other major chip firm are manufactured.

In October 2022, the Biden administration went a step further when it published a sweeping set of export controls, including a measure to cut off China from certain semiconductor chips made anywhere in the world with U.S. equipment. The move vastly expanded Washington’s reach in its bid to slow Beijing’s technological and military advances.

Japan and the Netherlands followed up with similar rules earlier this year.

Without American AI chips from companies like Nvidia and AMD, Chinese organizations will be unable to cost-effectively carry out the kind of advanced computing used for image and speech recognition, among many other tasks.

Image recognition and natural language processing are common in consumer applications like smartphones that can answer queries and tag photos. They also have military uses such as scouring satellite imagery for weapons or bases and filtering digital communications for intelligence-gathering purposes.

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