Nvidia shares (NVDA) fell nearly 2% on Monday after the Biden administration published an updated export rule aimed at controlling the flow of artificial intelligence chips to “adversaries” like China.
The White House said the rule would limit the number of AI chips called GPUs (graphics processing units) which can be ordered in most countries without a special license. Small orders of 1,700 GPUs or less would not count toward the export cap.
NasdaqGS – Deferred listing•USD
Closing: January 14 at 4:00 p.m. EST
“Artificial intelligence is quickly becoming essential to both security and economic strength,” the White House said in a statement Monday. “The United States must act decisively to lead this transition by ensuring that American technology underpins the global use of AI and that adversaries cannot easily abuse advanced AI.”
Some 18 “key” US allies, including the UK, Netherlands and Taiwan, will face no restrictions on shipments of AI chips, and 24 countries subject to arms controls – such as China, North Korea and Russia – will still face an outright ban on receiving exports of the latest AI chips.
The main significance of the updated restrictions lies in capping the computing capacity of a given group of AI chips that can be shipped to other countries around the world.
Under the rule, U.S. companies could ship AI chips with total processing power equal to about 50,000 Nvidia Hopper chips or 20,000 of its latest Blackwell chips, Bernstein analyst Stacy Rasgon said. Countries subject to this cap include U.S. allies like Switzerland and Israel.
The rule aims to close loopholes in previous AI chip export restrictions in 2022 and 2023 “by thwarting contraband” and “elevating AI safety standards,” the White House said.
“(These restrictions) will make it even more difficult for Chinese entities to purchase the most advanced NVIDIA chips,” DA Davidson analyst Gil Luria told Yahoo Finance in an email Monday.
“While there have already been some restrictions on chip sales, reports indicate that advanced NVIDIA chips are arriving in China, likely due to NVIDIA’s limited control over its resellers.” Luria explained in a previous email last week.
In addition to Nvidia’s advanced chips sold through resellers, Nvidia manufactures specific versions of chips that comply with current U.S. trade restrictions on China. Sales of Nvidia’s H20 chips – its Hopper chips for China – “should not be affected by the controls,” Rasgon wrote in the memo.
Nvidia’s vice president of government affairs, Ned Finkle, said in a statement Monday that the rule was “drafted in secret and without proper legislative review.”
“And 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,” he said. he declared.
Companies have a longer than usual 120 day period to provide feedback on restrictionsBloomberg reported, giving the Trump administration time to make changes to the rule, which is expected to take effect in a year. Nvidia’s statement included an apparent appeal to the new administration.
“As the first Trump administration demonstrated, America wins through innovation, competition and sharing its technologies with the world, not by hiding behind a wall of government overreach,” Finkle said . “We look forward to a return to policies that strengthen American leadership, support our economy, and preserve our competitive advantage in AI and beyond.”
Nvidia CEO Jensen Huang holds a new Nvidia GeForce RTX 5090 graphics card and an RTX 5070 laptop as he delivers a speech at CES 2025 in Las Vegas, Nevada January 6, 2025. REUTERS/Steve Marcus/File Photo ·Reuters / Reuters
In a note to investors Monday morning, Bank of America analyst Vivek Arya reiterated his buy rating on Nvidia stock, but noted that the stricter export rule “muddys the waters” for the AI chip manufacturer. Citi analyst Atif Malik said that while the news was “not too surprising,” the new export cap of 50,000 GPUs to 120 countries poses “risks” to center GPU sales. data from Nvidia, which represent the vast majority of Nvidia’s revenue.
Nvidia shares’ decline Monday extends its decline from Friday, when shares fell 3% in anticipation of updated export controls. It is now down around 9% over the last five sessions.
The stock also came under pressure after HSBC lowered its price target on Nvidia shares from $195 to $185, citing supply chain issues at Blackwell, which it said “could remain an overhang” for the first half of the Company’s fiscal year 2026 (which occurs during calendar year 2025).
The Semiconductor Industry Association echoed Nvidia’s response to the rule: declaring Monday, “We are deeply disappointed that a policy change of this magnitude and impact would be rushed days before a presidential transition and without any meaningful industry input.”
StockStory aims to help individual investors beat the market.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
