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[News] NVIDIA’s Revenue at Risk as U.S. AI Chip Export Restrictions Loom; Big CSPs Set to Benefit
The Biden administration tightened chip export controls in its final days, as it announced sweeping new AI chip regulations aimed at China. As the world’s leading AI accelerator firm, NVIDIA is regarded to be heavily impacted, while major cloud providers like Microsoft, Google, and Amazon are likely to benefit, as per a report from Reuters.
Notably, a Tom’s Hardware report points out that unlike previous rules, which are mostly presented as blacklists, the new restrictions apply globally, using a whitelist approach. Only 18 key allies and partners are exempt from the controls, with countries like U.S., Canada, Germany, Japan, the Netherlands, South Korea and Taiwan leading the way.
Potential Impact on NVIDIA
NVIDIA is certainly not a fan of the curbs, as the U.S. chip giant fired back in a press release, noting that by attempting to rig market outcomes and stifle competition — the lifeblood of innovation — the Biden Administration’s new rule threatens to squander America’s hard-won technological advantage.
Ned Finkle, NVIDIA’s Vice President of Government Affairs, argued the regulations would place heavy bureaucratic controls on how American chips, computers, systems, and software are developed and sold worldwide.
According to Reuters, citing company filings, NVIDIA earns about 56% of its revenue from international markets, with China accounting for 17% of sales. Therefore, the new rules will likely reduce NVIDIA’s market in a considerable way, as nearly half of its chips now go to countries that will be restricted, as noted by the report.
Big CSPs May Turn out to Benefit
Notably, the Reuters report notes that the new rules may allow major cloud providers like Microsoft, Google, and Amazon to seek approval to bypass licensing for AI chips, enabling them to set up data centers in restricted countries, which will boost their market dominance in AI.
It is worth noting that in addition to grouping countries into a three-tier system, the new regulations also classify companies into three troops: Universal Verified End Users (EVEUs), National Verified End Users (NVEUs), and non-VEUs. EVEUs meet U.S. security standards and are based in allied countries, while NVEUs also meet these standards but are not in countries of concern.
Overall, chip orders with collective computation power up to roughly 1,700 advanced GPUs do not require a license. But according to Tom’s Hardware, depending on their location, companies face limits on the number of “advanced GPUs” they can purchase. NVEUs can buy up to 320,000 GPUs over two years, while non-VEUs are limited to 50,000 per country.
The Reuters report suggests that those with access to the most advanced chips, like the major cloud providers, will have a clear advantage.
Uncertainties Loop in Trump’s Term
According to Reuters, there is still a possibility for a turnaround. The report indicates that though both administrations share concerns about China’s competitiveness, President-elect Trump may be more open to negotiating with individual companies and countries.
Interestingly enough, NVIDIA makes a friendly gesture towards Trump in the statement, noting that “the first Trump Administration laid the foundation for America’s current strength and success in AI, fostering an environment where U.S. industry could compete and win on merit without compromising national security.
While the new rules won’t take effect for 120 days, it may allow the incoming Trump administration time to weigh in.
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(Photo credit: NVIDIA)
