On Wednesday, a US graphics chip maker, Nvidia reported that the US government is restricting the sales of two top computing chips (A100 and H100) to the People’s Republic of China. The US government also spread the restriction to Hong Kong and Russia in order to address growing concerns they may use the chips in, or divert to, the production of military weaponry. The US government has placed a license requirement for exportation to the affected countries. 

Why it matters 
The US government led by President Joe Biden is taking significant steps to collapse China’s technological capabilities by cutting its needed supplies following the tensions existing between both countries as a result of the U.S. House Speaker Nancy Pelosi and other officials’ controversial trip to Taiwan.

  • Due to the imposed license by the US, Chinese businesses that require the AI chips for image and speech recognition amongst many other tasks would have difficulty in continuing production of smartphones, tablets, satellite imagery, etc. at a cost-effective rate. 

What you should know 
After reports of the imposed license broke, Nvidia shares fell by 6.6% hours later. The restriction affects two of its computing chips; A100 and H100. Both are designed to speed up machine learning tasks. 

Nvidia and China had booked a $400 million purchase of the affected chips. All of which the US graphics chip maker could lose if China decides not to divert the funds into purchasing alternative Nvidia products. 

Nvidia and other Western companies, including AMD (another chip company) halted the sales of computing chips to Russia after President Putin launched an invasion into Ukraine in February.

What to watch 
The Chinese government could seek a similar economic retaliation. 

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