US to restrict Nvidia’s AI exports to China, banning H800 and RTX 4090 sales

US confirms plans to curb the sale of more US-made AI chips to China, and Nvidia aren’t happy

Today is not a good day for Nvidia. The company’s stock price has dropped, as the US has confirmed that they plan to ban the sale of more US-made AI chips to China, primarily targeting Nvidia parts. In their announcement, the US confirmed that Nvidia’s A800 and H800 were included in this ban. This time the ban even includes Nvidia’s GeForce RTX 4090. The US’ announcement has also seen the stock prices of AMD, Broadcom, Intel, and Marvell fall.

AI is a huge money maker for Nvidia right now, so it is no surprise that Nvidia’s stocked closed at -5% last night. With the US’ planned ban, Nvidia cannot sell their most performant, and expensive, AI chips to the Chinese market. That lowers Nvidia’s sales potential, and artificially lowers demand for their products.

The US’ new ban is designed to work around the efforts US chipmakers made to maintain Chinese sales. Nvidia specifically designed their A800 and H800 AI chips to work around previous US export restrictions. Now, the US’ licensing rules are based around performance thresholds. This change now places Nvidia’s gaming-focused RTX 4090 on Nvidia’s list of restricted products.

On October 17, 2023, the U.S. Government, or USG, announced that it submitted the Interim Final Rule, “Implementation of Additional Export Controls: Certain Advanced Computing Items; Supercomputer and Semiconductor End Use; Updates and Corrections” (the “Interim Final Rule”) for publication in the Federal Register.

The Interim Final Rule amends ECCN 3A090 and 4A090 and imposes additional licensing requirements for exports to China and Country Groups D1, D4, and D5 (including but not limited to Saudi Arabia, the United Arab Emirates, and Vietnam, but excluding Israel) of the Company’s integrated circuits exceeding certain performance thresholds (including but not limited to the A100, A800, H100, H800, L40, L40S, and RTX 4090). Any system that incorporates one or more of the covered integrated circuits (including but not limited to NVIDIA DGX and HGX systems) is also covered by the new licensing requirement. The licensing requirement includes future NVIDIA integrated circuits, boards, or systems classified with ECCN 3A090 or 4A090, achieving certain total processing performance and/or performance density.

Nvidia made custom AI chips to skirt around US regulations

In a sense, Nvidia had this coming. Nvidia specifically created their A800 and H800 AI chips to skirt around the US’ prior export restrictions. This allowed Nvidia to sell to chips that were highly similar to banned chips in China, greatly lessening the impact of the US’ restrictions. This forced the US to change their restrictions to harden their ban of high-end AI chip exports to China.

Currently, Nvidia does not expect the US’ new rules to have a huge impact on the company’s finances. Nvidia’s AI chips are selling as fast as they can make them. While losing access to the Chinese market will lower overall demand, there is more than enough interest in AI for Nvidia to meet their sales targets.

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