US Plans New Restrictions on AI Shipments to China, Stocks Plummet

The anticipation of new restrictions on the shipment of artificial intelligence (AI) chips from the United States to China has sent shockwaves through the market, resulting in a significant decline in China's AI stocks.

Chinese AI Stocks Plummet

The Wall Street Journal reported on Wednesday that the US is planning to impose these curbs, affecting prominent chip makers like Nvidia, as early as July.

Nvidia, renowned for its graphics chips that power cutting-edge technologies such as OpenAI's ChatGPT and Alphabet's Bard chatbots, is expected to feel the impact of these measures.

As news of the potential curbs spread, China's CSI artificial intelligence index experienced a substantial 3% decline in Asian markets, according to CNBC's report.

Specifically, Inspur Electronic Information Industry, listed on the Shenzhen stock exchange, witnessed a significant drop of 10%, while Chengdu Information Technology of the Chinese Academy of Sciences saw its shares plummet by nearly 8%.

These companies are known to specialize in the production of computers and software.

The repercussions were not limited to these firms as the Hong Kong stock exchange also dropped approximately 1.6%. Alibaba, having launched its own version of the widely popular chatbot ChatGPT, felt the impact of the looming restrictions.

Similarly, Tencent, actively engaged in creating its own AI model, saw a drop of 1.58% in its shares.

New AI Curbs

Sources familiar with the matter cited by the Wall Street Journal revealed that the US had expressed worries about China's AI technological advancements. To address these concerns, the US Commerce Department may implement measures to halt chip shipments from companies like Nvidia to customers in China and other countries of concern without obtaining a license beforehand.

The potential imposition of new curbs would further strengthen Washington's ongoing efforts to impede China's access to advanced chip technology. In October, the US already introduced measures to sever China's ties to advanced chip equipment.

In response, Beijing retaliated in May by prohibiting Chinese operators of critical information infrastructure from purchasing products from Micron Technology, citing concerns over a perceived "major security risk."

Washington allegedly advised South Korea against permitting its domestic chip manufacturers to enter the Chinese market. Starting in September, both Nvidia and AMD, prominent US chip giants, have been prohibited by Washington from exporting their advanced chips to China and Hong Kong.

In an effort to adhere to export control regulations, Nvidia purportedly introduced an alternative advanced chip, known as the A800, in China last November.

Nevertheless, as per the Journal report, the newly proposed restrictions would prevent the sale of A800 chips to China unless a special export license is obtained from the US.

Despite these regulatory challenges, a recent report from Reuters suggests that Nvidia's highly coveted A100 chips are discreetly making their way into China's underground markets, commanding an exorbitant price of $20,000 per unit-twice the regular price.