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Nvidia Stock Price at 52-Week Low After US Restricts Sales to China

  • The share price of Nvidia hit a 52-week low after the US restricted sales to China
  • In 2022, China accounted for over 27% of the total sales
  • Companies would be required to obtain a license from the US government before selling certain cutting-edge chips to China and Russia

The stock price of Nvidia, one of the largest chipmakers in the US, fell to a 52-week low after the US imposed new restrictions on the export of the company’s artificial intelligence (AI) chips to China and Russia. Advanced Micro Devices Inc., another major chipmaker in the US, was also notified of the new licensing requirement, preventing it from exporting an advanced chip aimed at the AI and high-performance computing markets. However, AMD said that it does not expect a major impact on its business.

About the Restrictions

The companies would be required to obtain a license from the US government before selling certain cutting-edge chips to China and Russia. The restrictions cover Nvidia’s A100 and the coming H100 integrated chips, which are expected to speed up machine learning tasks and any systems that include them. The new restrictions will address the potential risk that the technology/product could be used in, or diverted to, military end use or military end user in China and Russia.

Impact on Chipmakers

The new restrictions could affect the earnings of the US chip manufacturers such as Nvidia and AMD as both companies have a large exposure to China and this move could result in a major impact in the future, especially if China chooses to retaliate. According to Nvidia, the company could lose as much as $400 million in quarterly sales after the US imposed new licensing requirements on shipments of some of its most advanced chips to China. The new licensing requirements come at a challenging time for chipmakers when demand for personal computers, video games, and smartphones, along with other electronic gadgets, decreased as a result of high inflation and a bleak economic outlook that continues to affect the consumers’ capacity to spend.

Increasing Tensions Between the US and China

This is not the first time the US cut the supply of semiconductors to companies in China. In 2020, the US restricted manufacturers from selling chips made using US technology to tech giant Huawei without a special license. Export restrictions by the US hindered the growth of major Chinese chip manufacturers, including Semiconductor Manufacturing International Corp, the largest chipmaker in the country. Without American processors from companies such as Nvidia and AMD, it could be challenging for Chinese companies to efficiently do the complex computation necessary for image and voice recognition, among other jobs.

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