Latest US ban on Chinese exports a big blow for China's AI aspirations

According to a recent report, the US Department of Commerce is eyeing to impose further restrictions on the export of AI chips to China, citing escalating concerns regarding their utilisation in military modernisation efforts. The proposed measures could potentially prohibit chip shipments from manufacturers like Nvidia to Chinese customers as early as next month.

This move is part of a broader US strategy aimed at curbing China's advancements in AI, particularly within the military domain. However, these restrictions are also adversely impacting China's commercial AI sector, where numerous companies operate with teams bridging both the US and China.

No signs of relief for Nvidia

The new export controls represent an update to measures implemented in September, which already limited the sale of Nvidia's cutting-edge A100 and H100 chips, designed for high-performance computing, to China. In response, Nvidia introduced the A800, a less powerful AI chip, as a workaround to bypass the export restrictions. However, even this chip may now face additional limitations, potentially necessitating an export license before shipping to China.

More on $nvda chip ban, they tried to circumvent US ban on export of AI chips to China, so this new July ban will be stronger

In September, Nvidia had said that U.S. officials asked the company to stop exporting two top computing chips for artificial intelligence work to China.… — Special Situations 🌐 Research Newsletter (Jay) (@SpecialSitsNews) June 28, 2023

Nvidia has declined to comment on the report.

Demand surge and Stockpiling

As the demand for computational power continues to surge, fueled by advancements in large language models like GPT-4, Chinese tech firms have been stockpiling Nvidia's AI chips in anticipation.

ByteDance, for example, reportedly placed orders worth over $1 billion for Nvidia GPUs this year, whereas the banned A100 chips are being sold on the Chinese black market for as much as $20,000 each, twice the regular price as per reports.

Possible US Restrictions on Chinese AI Companies' Access to its Cloud Services

Additionally, the US government is considering restrictions on leasing cloud services to Chinese AI companies, as per reports. This would deal a significant blow to Chinese firms that currently utilise such arrangements to circumvent the chip bans. However, the AI companies could potentially result in collateral damage, affecting numerous Chinese tech companies inadvertently caught in the ongoing chip war's crossfire.

Chinese companies often prefer American cloud providers over domestic options like Alibaba or Tencent during their global expansion, as Western regulators become increasingly cautious about Chinese services. Limiting access to US cloud services could pose challenges for Chinese firms in meeting local data storage regulations, further complicating their expansion plans.