On the way out, the Biden administration on Monday released its broadest rules yet on exports of artificial intelligence chips, sending Nvidia shares lower. News The Commerce Department proposed broader restrictions on chip exports, which it argues are necessary for national security because they would make it harder for China and other US adversaries to access cutting-edge technology. of AI computing. Shares of Nvidia, the dominant maker of AI chips known as graphics processing units, or GPUs, fell roughly 2.5% on Monday as investors grappled with the potential implications for the Club’s booming business. The former portfolio that owns Advanced Micro Devices, which is vying for a share of the AI chip market, initially lost nearly 1% on the news, before bouncing back slightly higher. Shares of Broadcom, which co-designs AI chips for many companies including China-based ByteDance, rose modestly in Monday’s session. ByteDance is the parent company of TikTok. In a research note, analysts at Citi expressed confidence in Broadcom’s broader AI business even if its ByteDance relationship is affected. Previous efforts by the Biden administration to limit China’s access to AI technology — “starting in 2022” — focused largely on the computing capabilities of individual chips used in data centers to train and power AI models. What that meant, in practice, was that the most advanced GPUs made by Nvidia were deemed too powerful to ship freely to Chinese customers, which historically represented between 20% and 25% of Nvidia’s revenue. company from the data center. To comply with the rules, Nvidia has developed closed versions of the chips for the Chinese market that do not exceed performance limits mandated by the US government and, therefore, did not require an export license to ship to customers. The AI export rules announced Monday take a different path to meet the geopolitical goals of the Biden administration. The Commerce Department laid out what it called a “multi-part framework” that creates global licensing requirements for AI chips and related technology. Rather than focusing on the capabilities of individual chips, the framework would set a limit on the amount of computing power most countries can provide within a given time frame. Most notably, a group of 18 US allies – including Japan, the United Kingdom, Germany, Taiwan and South Korea – are exempt from the rules. For countries not on that exempt list, such as Singapore, there is an additional licensing exception for shipments of AI chips “far below the amount needed to train the most advanced AI models,” according to a draft proposal by the Department of Defense. Trade. This aims to ensure that sales to universities can continue, for example. The big picture At this point, it remains unclear what financial impact Nvidia could face if these proposals are implemented. Timing is also key here, with the Trump administration set to take office within a week. President-elect Donald Trump is a known China hawk, but these proposals affect all parts of the globe. The Trump transition team did not immediately respond to the Club’s request for comment. The Commerce Department will open a 120-day comment period on the rules this week, giving companies a chance to weigh in on concerns. Nvidia has already made its feelings known. Ned Finkle, vice president of external affairs, did not mince words. “This sweeping override would impose bureaucratic control over how America’s leading semiconductors, computers, systems and even software are designed and marketed globally,” Finkle wrote in a blog post published Monday. “By seeking to manipulate market outcomes and stifle competition — the lifeblood of innovation — the Biden administration’s new rule threatens to squander America’s hard-won technological advantage.” The head of the Semiconductor Industry Association, a Washington-based lobbying group, also criticized the proposal. “We are deeply disappointed that a policy change of this magnitude and impact is being rushed just days before a presidential transition and without any meaningful input from the industry,” SIA President and CEO John Neuffer said in a statement. “The new rule risks causing unintended and lasting harm to America’s economy and global competition in semiconductors and AI by ceding strategic markets to our competitors.” “The stakes are high and the timing is tough,” he continued. “We stand ready to work with leaders in Washington to chart a path forward that protects national security while allowing us to do what America does best — compete and win globally.” Conclusion Jim Cramer called the Commerce Department’s broader proposal “absurd” and part of a “last-ditch effort” by the Biden administration to throw a wrench into the chip industry. He said he doubted the Trump administration would consider bringing him back. Jim noted that Nvidia CEO Jensen Huang has emphasized the company’s opportunity in “sovereign AI,” a concept that refers to a country having control over its own computing infrastructure and data in order to develop AI solutions that include their local customs and culture. In the fall, Huang traveled to a number of countries to promote various AI initiatives, including Japan, Indonesia, India, and Denmark. Of these four, all but Indonesia are included in the 18 “excluded” countries. As Monday’s stock drop adds to the latest stretch of volatile trading for Nvidia, “you know I think Nvidia is great,” Jim said. Nvidia shares closed at a record high of $149.43 each on January 6. As of Monday afternoon trading action, Nvidia was in correction territory, defined by a decline of more than 10% from recent highs. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of stocks.) 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Nvidia Corp. signals. outside the company’s headquarters in Santa Clara, California on November 19, 2024.
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On the way out the door, the Biden administration on Monday released its broadest rules yet on exports of artificial intelligence chips, sending stocks of Nvidia lower ones.
