Nvidia seeks a new US government license to address military use concerns in China and Russia. The company emphasizes the urgency of implementing this license without delay. Additionally, there are concerns that the rule may lead to a significant loss of revenue, amounting to millions of dollars.

Both chipmakers’ stock prices dropped in New York’s after-hours trading.

Shares of AMD fell 3.7% while those of Nvidia fell 6.6%.

For Nvidia, the new limitations represent a “gut punch,” according to Dan Ives of Wedbush Securities.

The US invests much in technology to compete with China.
Why is there a lack of chips?

Chinese authorities have vehemently criticized the most recent action. US actions breach international trade regulations, says official media.

Beijing issued a statement in which it demanded that “the US side immediately cease its wrongdoing, treat firms from all over the world fairly, including Chinese companies, and do more things that are favorable to the stability of the global economy.”

According to a statement to the BBC, the US Commerce Department is “not in a position to specify particular policy adjustments at this time.”

A representative for the Commerce Department stated, “We are taking a holistic approach to implementing additional policies necessary linked to technology, end-uses, and end-users to defend US national security and foreign policy interests.

“This also entails stopping China’s

acquisition and application of US technology as part of its military-civil fusion agenda to support its military modernization goals, engage in abuses of human rights and facilitate other nefarious actions.

Nvidia’s A100 and H100 chip exports may be affected by the new license requirement, impacting approximately $400 million in sales to China.

A representative for Nvidia said that the company was in contact with Chinese consumers “to satisfy their planned or future orders with other products.”

AMD’s representative expects minimal impact on business from the regulations barring export of MI250 chips to China.

Following the invasion of Ukraine in February, shipments to Russia were banned by both Nvidia and AMD.

According to analysts, China may find it more challenging to purchase chips for advanced computing due to US restrictions.

It might also have an impact on the profits of US manufacturers like Nvidia and AMD, according to Mario Morales, a market research analyst located in California.

China’s potential response could impact both companies’ heavy exposure, warns Mr. Morales.

RISING TENSIONS:-Nvidia said last week that second-quarter revenue of $6.7 billion fell far short of expectations.

However, it reported

that income from its data center business—which makes computer chips—rose by 61% over the same period last year.

Ives stated that this serves as a geopolitical warning to China, and it will further escalate tensions. Nvidia has become an unintended casualty in the ongoing trade and technological dispute between the US and China.

After Nancy Pelosi’s trip to Taiwan, tensions between the world’s two largest economies escalated.

China insists on integrating the autonomous island with the mainland, deeming it an integral part of its territory.