Nvidia headquarters.
While Nvidia and the European Union have expressed their displeasure with the Biden administration’s latest AI export restrictions, some companies and countries may actually benefit from them. But the industry as a whole will suffer, and so will American technological leadership.
Nvidia is clearly upset, and rightly so, about the new rules, which limit sales to all but 18 US friends. Nvidia says these restrictions will limit how much the have-nots will be able to build AI to help their economies and populations and favor America’s 18 wealthy partners in deploying AI forever. This new policy is so short sighted, I am ashamed to call myself a democrat.
The impact is not pretty
These limitations will push AI developers and AI users in two directions. First, Chinese AI companies building AI chips and models will benefit immensely over the next few years. Yes, their chips are slower and their software is immature, but at least you can get them. And if you are in Africa, South America or Asia, these platforms can become your best and maybe only choice. Developing sovereign AI is not optional. It is a national priority for many countries.
Second, US cloud server providers stand to gain as developers in other countries find ways to circumvent the rules and access GPU or CSP ASICs to train and use the AI models they need.
The threat from China (and India)
India and China are already building a talent pool that makes the US look vulnerable to long-term competition in AI. According to a report released today by the US White House, “Not only is China producing more S&E PhDs than the United States, the gap is widening. In 2018, China produced 65 percent more PhDs in S&E than the United States. In 2022, China produced 99 percent more S&E PhDs than the United States—almost double. “
AI Talent Report, January 14, 2025
Now, the US government argues that preventing China’s access to our hardware will slow them down, and it will. But for how long? And wouldn’t they use and improve all indigenous silicon instead? And even if you buy this strategy, limiting access to AI hardware in other countries only hurts them and the US; not China. “Instead of mitigating any threat, Biden’s new rules would only weaken America’s global competitiveness, undermining the innovation that has kept the US ahead,” said Ned Finkle, vice president of government affairs at NVIDIA.
The Net Effect
The bottom line is 1) US tech companies will be prevented from realizing potential sales in countries that aren’t among the lucky 18, 2) The rest of the world will be left out of the AI revolution or forced to buy inferior hardware, and 2) Chinese tech firms will fill that vacuum, both in China and elsewhere.
Why are we helping China challenge our hard-won technological leadership in AI? Campaign corks are on display in Shanghai.
FINDINGS: This article expresses the opinions of the author and should not be taken as advice to buy or invest in the companies mentioned. Cambrian-AI Research is fortunate to have many, if not most, semiconductor firms as our clients, including Blaize, BrainChip, Cadence Design, Cerebras, D-Matrix, Eliyan, Esperanto, Flex, GML, Groq, IBM, Intel, Nvidia, Qualcomm Technologies, Si-Five, SiMa.ai, Synopsys, Ventana Microsystems, Tenstorrent and many investment clients. We have no investment positions in any of the companies mentioned in this article and do not plan to initiate any in the near future.
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