Nvidia stock (NVDA) fell nearly 2% on Monday following the Biden administration’s announcement of updated export rules aimed at restricting the flow of artificial intelligence chips to adversaries, including China.
Nvidia stock drops as Biden administration tightens AI chip export rules
The White House stated that the new rule would limit the quantity of AI chips, specifically graphics processing units (GPUs), that can be ordered by most countries without a special license. Orders for 1,700 or fewer GPUs will not be counted towards the export cap. “Artificial intelligence is quickly becoming central to both security and economic strength,” the White House added. It emphasized the need for the U.S. to ensure its technology supports global AI use while preventing adversaries from abusing advanced AI.
Nvidia warns: New AI chip rules could hurt America’s edge in tech
The updated restrictions impose a cap on the compute capacity of a group of AI chips that can be shipped to most countries, with 18 key U.S. allies, including the UK, Netherlands, and Taiwan, facing no restrictions. Conversely, 24 countries subject to arms controls, such as China, North Korea, and Russia, will continue to be banned from receiving exports of the latest AI chips.
Under the new rule, U.S. companies can ship AI chips with a total compute capacity of 790 transistors per square millimeter to eligible countries. This figure translates to around 50,000 Nvidia Hopper chips or 20,000 of its latest Blackwell chips, according to Bernstein analyst Stacy Rasgon. Countries affected include U.S. allies such as Switzerland and Israel. For context, Microsoft reportedly purchased 485,000 Nvidia Hopper GPUs in 2024, while Meta acquired 224,000 of the AI chips.
The purpose of these restrictions is to close loopholes in previous export regulations on AI chips enacted in 2022 and 2023, focusing on thwarting smuggling and enhancing AI security standards. DA Davidson analyst Gil Luria noted that these regulations would make it more challenging for Chinese entities to access advanced Nvidia chips, as there have been reports of such chips reaching China despite prior restrictions.
Nvidia has specific versions of chips compliant with existing U.S. trade regulations, including its H20 chips designed for China, which should remain unaffected by the new controls, according to Rasgon.
Nvidia’s vice president of government affairs, Ned Finkle, criticized the rule as being “drafted in secret and without proper legislative review.” He argued that the new regulations threaten innovation and competition in the tech industry, claiming that they could squander America’s technological advantage. Finkle expressed hope for a policy return that prioritizes innovation and competition, noting the achievements during the first Trump administration.
In a note to investors, Bank of America analyst Vivek Arya maintained a Buy rating on Nvidia stock but suggested that the new export rule complicates the situation for the AI chipmaker. Additionally, Citi analyst Atif Malik pointed out the risks posed by the export cap for Nvidia’s GPU sales, particularly concerning data centers that constitute a significant portion of the company’s revenue.
The decrease in Nvidia’s stock on Monday follows a 3% drop on Friday amid anticipation of the updated export controls. Overall, shares have declined around 9% over the past five sessions. The stock also faced downward pressure after HSBC reduced its price target for Nvidia from $195 to $185, citing ongoing supply chain concerns regarding the Blackwell chips.
Why Nvidia’s record high was followed by a $220B sell-off
The Semiconductor Industry Association echoed Nvidia’s concerns about the new regulations. SIA Chief Executive John Neuffer expressed disappointment at the pace and lack of industry consultation surrounding the policy shift, stating that it could have detrimental impacts on the U.S. economy and its competitive position in the semiconductor and AI sectors.
The Biden administration’s interim final rule, “Export Control Framework for Artificial Intelligence Diffusion,” is designed to impose additional restrictions on the sale of AI processors and systems while emphasizing national security. As President Biden transitions power to President-elect Donald Trump on Jan. 20, concerns grow about the implications of these last-minute regulations on innovation and growth in the tech industry.
Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.
Featured image credit: Nvidia
