China internet stocks lost ground Wednesday following a report in The Wall Street Journal that the Biden Administration intends to make it harder for chip makers
Nvidia
and
Advanced Micro Devices
to sell their most advanced processors to Chinese companies working on generative artificial intelligence applications.
The group of companies that would be affected by a ban includes China’s largest internet players—
Baidu
(ticker: BAIDU),
Alibaba
(BABA),
Tencent
(TCEHY) and privately held ByteDance, parent of TikTok.
Last August, Nvidia (NVDA) warned that it could lose up to $400 million of quarterly sales from the U.S. government’s imposition of new licensing requirements on the sale of some of its most advanced chips to customers in China. The Biden Administration said at the time that it was worried the chips could fall into the hands of China’s military. For Nvidia, the original ban covered its popular A100 and H100 chips, used to train large language models.
Nvidia responded by creating less-powerful chips for the China market—the A800 and H800—but according to the Journal, the new restrictions would also ban export of those chips without a license.
At an investment conference Wednesday, Nvidia CFO Collette Kress said that she doesn’t expect any near-term impact from the expansion of export restrictions to cover the A800 and H800. But Citi analyst Atif Malik wrote in a research note that over time, restrictions on Nvidia’s ability to sell to Chinese customers could be an issue. He notes that Nvidia’s sales to China have historically been in the 20% to 25% range.
Earlier this month, the South China Morning Post reported that China’s big tech firms were scrambling to find replacement parts for Nvidia’s processors. That story cited a commentary in the state owned Economic Daily asserted that China’s AI sector was being slowed by a shortage of GPUs and other components.
Baidu and TenCent declined to comment on the Journal report; the other affected China companies didn’t immediately respond to a request for comment.
In U.S. trading Wednesday, Alibaba was down 2.6%, Baidu was off 1.6% and Tencent was 2% lower.
Write to Eric J. Savitz at [email protected]
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