US Mulls Tightening Ban On AI Chips To China

Washington is understood to be considering further restrictions on the export to China of advanced chips used for AI processing, moves which could dent the sales of companies including Nvidia and AMD.

Existing curbs introduced in the autumn are already fueling a burgeoning black market for GPUs in China, and this latest action would only exacerbate the situation.

The US Department of Commerce could introduce more expansive measures as soon as next month to require makers of chips used in AI to obtain a license before they can sell to China and other countries of concern, according to the Wall Street Journal, which cites anonymous sources said to be familiar with the situation.

It is believed the new measures will extend the restrictions made public in September that imposed export license requirements on companies like Nvidia and AMD, and which covered high-end GPU products such as Nvidia's A100.

These restrictions were put in place due to fears that advanced chips might be used in or diverted to applications training AI that could be of benefit to the military in China or Russia, Nvidia said at the time.

There could be some justification for this; it was reported earlier this year that China's agency responsible for developing and maintaining nuclear weapons has been operating infrastructure powered by Intel and Nvidia chips, despite such kit being covered by an existing trade ban.

Cynics might, however, say that the US also does not welcome any rivals that might surpass it in developing AI technology.

In response to the earlier restrictions, chipmakers began producing less powerful products that would fall below the threshold of the US government ban, with Nvidia offering to customers in China the A800 GPU that went into production in Q3 2022 as an alternative to the A100.

Now it appears that lawmakers in Washington are planning to expand the ban to include even these lower performing products. In response, shares in Nvidia were reported to be down by 3.2 percent and those of AMD down about 3 percent in New York trading yesterday evening, following the reports.

The Department of Commerce was not immediately available to comment. We also asked Nvidia and AMD for confirmation, but the companies are likely to be unable to comment until the policy is made public.

Such is the demand for advanced AI processing hardware in China that a black market has sprung up to sidestep the US export restrictions. As The Register reported earlier this week, developers in the country are still able to obtain small batches of Nvidia A100s by importing them from other Asian nations including India, Taiwan or Singapore, and electronics stores are said to be offering them for sale at $20,000, or double the regular price.

• US export ban drives prices of Nvidia's latest GPUs sky high in China
• DC thermal management, power kit is getting easier to find and a lot more expensive
• Meta teaches AI image model to stop generating human fingers like a drunk Picasso
• Yeah, Rishi, it's AI that'll make Britain great again

This is backed up by the South China Morning Post, which claims that smuggling GPUs into China has become a big moneymaking enterprise, such that there are thousands of unofficial intermediaries sourcing Nvidia products to meet the demand from technology companies developing services based on generative AI models.

Nvidia declined to comment when approached.

Whether such export restrictions are ultimately effective remains unanswered. As The Register reported earlier this year, Chinese companies that are unable to procure advanced compute technologies such as GPUs are still able to take advantage of them through cloud service providers renting out access instead. ®