A US order to ban exports of some AI chips to China is likely to hit almost all major tech companies running public clouds or artificial intelligence training modules in the country, Reuters news report said.
Chip designer Nvidia said that U.S. officials told it to stop exporting two top computing chips for AI work to China.
Advanced Micro Devices (AMD) said it received new license requirements that will stop its advanced AI chip called MI250 from being exported to China.
Shu Jueting, a Chinese Commerce Ministry spokesperson, said on Thursday that Beijing opposes the measures, saying they undermine the rights of Chinese companies and threaten to disrupt global supply chains.
“We’re going from blocking certain U.S. companies from supplying to a certain company, as was the case with Huawei, to banning certain U.S. products from selling to China period,” said Jay Goldberg, CEO of D2D Advisory, a finance and strategy consulting firm.
The worst case scenario would be Washington broadening the ban to block contract chipmakers such as Taiwan Semiconductor Manufacturing (TSMC) and Samsung Electronics from making chips for Chinese chip designers, Jefferies’ analysts said in a note.
“We are not there yet, and the U.S. will likely evaluate the effectiveness of each incremental step before drastic action is considered.”
Market watchers say the latest ban is likely to hit Chinese tech companies including Alibaba, Tencent, Baidu, and Huawei Technologies.
Affected companies could either rely on cloud services from Alphabet’s Google or Amazon.com’s AWS to develop AI software and export it back to China, or use multiple lower-end chips to replicate the processing power of the banned, high-end chips, Jefferies said.
The Nvidia and AMD chips targeted by Washington are used for AI and machine learning applications, particularly building training modules for tasks such as natural language processing.
These modules could also be useful for militaries in modeling bomb simulations and designing weapons.
Goldberg at D2D said there are few Chinese companies that could offer chips to replace those of AMD and Nvidia quickly and the restrictions would likely spur more funding for domestic chip startups to narrow its gap with U.S. firms.