The AI Chips War between China and The US is heating up following the high certainty of the US imposing stringent restrictions on China. Hence, China’s AI stocks dipped on Wednesday (6/28) after the news of the curbs surged. Some of the stocks to experience the fall were China’s CSI AI Index tumbling 3.76%, Inspur Electronic Information Industry decreasing 10% in the exchange market, and Hong Kong’s tech giant Alibaba declining 1.6%. According to reports from the Wall Street Journal, more than half of US Chip Makers are expected to halt their distribution to China. Among those chip makers is Nvdia, known for establishing one of the best graphics processing units (GPUs) and responsible for the technicalities behind OpenAI’s Chatgpt and Alphabet’s Bard chatbots. The decision on the chip’s export ban was seen to handicap China in developing more in AI, as the states have shown their disagreement with the technology. Additionally, The White House announced that it would go against AI advancement and considers it a crucial technology for numerous aspects, including military weapons and cybersecurity. Due to the restrictions, Chinese enterprises may find it challenging to source the chips necessary to develop artificial intelligence. Aggravating the situation further for China, The US has joined hands with Japan along with The Netherlands. It is a significant setback for China’s fast-growing artificial intelligence business, leaving questions for investors’ trust.
Concerns over national security and the potential exploitation of powerful AI technologies have made the export of AI chips to China a sensitive and highly debated issue. The US government has recently implemented strict restrictions on AI chip exports to China, aimed at preventing the development of potentially devastating AI-driven military capabilities. In addition, none of these prior US chip bans were as broad as the new rules issued on October 7, 2022. Unprecedented export control prohibits selling advanced chips to Chinese customers with high performance (at least 300 teraOPS) and fast interconnect speed (generally, at least 600 gigabytes per second). As a result, chips like Nvidia's A100 and H100, designed for data centers and AI trainers, cannot be sold to Chinese customers under these regulations. In order to strike a delicate balance between fostering innovation and preventing potential misuse, international cooperation and stringent export controls for AI chips are crucial. Transparent discourse, comprehensive laws, and regulations are needed to limit risks and promote responsible AI use. Additionally, the possibility of a merger between Nvidia and ARM raises concerns about granting China access to cutting-edge microprocessor technology, potentially bolstering its AI capabilities and posing significant challenges to global security. Collaboration, regulations, transparency, and responsible practices in AI chip exports are expected to mitigate risks, enabling beneficial use while preventing misuse.
Reports of the considerations of the US placing limitations on chip exports to China have reverberated throughout the market, impacting various facets of the industry. Chinese AI stocks experienced a downturn in response to these developments, as market participants grappled with uncertainties and negative sentiment. The particular concern is the potential curbs on chip exports, with discussions including a proposed ban on selling Nvidia's cutting-edge A800 chip without a specialized US export license. Despite these challenges, Wall Street's unwavering support for Nvidia, a prominent player in the chip manufacturing domain, has remained steadfast. EvercoreISI analyst, C.J. Muse, highlight Nvidia's established position in the market and its demonstrated adaptability as crucial factors that may mitigate potential adverse effects on the company's operations and stock performance. The emphasis lies on employing a refined strategy for restrictions and leveraging Nvidia's demonstrated agility, thereby indicating that the anticipated impact on the company is not projected to be substantial . Moreover, analysts posit that the demand for artificial intelligence is poised to outstrip supply this year. In this context, Nvidia's strategic ability to redistribute its chips to meet market needs further reinforces investors' confidence in its resilience. Notwithstanding ongoing worries about China's AI industry's future and the purchase of necessary processors, Nvidia's solid reputation and ability to deal with difficult situations support market optimism. The potential chip export limitations have dampened Chinese AI stocks, but investors trust Nvidia's resilience and strategic chip allocation, reinforcing market confidence despite uncertainties
Sources:
CNBC
The New York Times
The Wall Street Journal
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