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US Chipmaker Ordered To Halt Sales Of Semiconductors To China

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American chipmaker Nvidia announced in a Wednesday quarterly report that the U.S. government informed them of a new license requirement that would prohibit the sale of two advanced chips to China and Russia.

The U.S. government was concerned that the chips, which have applications in artificial intelligence work, might be co-opted by the Chinese or Russian militaries, according to Nvidia’s quarter two report. The chips were expected to generate $400 million in quarterly sales, revenue which is now in jeopardy from the new restriction, according to Reuters.

“The [United States government] indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia,” Nvidia’s report stated. “We do not sell products to customers in Russia.”

In a filing with the SEC, Nvidia, $NVDA, said the U.S. told the company on Aug. 26 about a new license requirement for future exports to China, including Hong Kong, to reduce the risk that the products may be used by the Chinese military.

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The broader personal-computer industry is facing a slump, with Intel reporting quarterly losses and Nvidia seeing a 33% drop in revenue from its gaming-oriented products, according to The Wall Street Journal. Nvidia’s reported revenue of $6.7 billion in quarter two was about 17% below the $8.1 billion it forecasted in May, primarily as a result of this slump, the WSJ reported.

Nvidia noted that the new license requirements would negatively impact their “research and development and supply and distribution operations” if they required transitioning operations out of China. Nvidia said that it was seeking an exemption with the U.S. government for “internal development and support activities.”

Nvidia also expressed in its report that it was seeking to either satisfy or replace outstanding orders with Chinese customers, and that it would pursue new licenses with the U.S. government. When asked for a comment on the situation, a spokesperson for Nvidia reiterated this point and stressed that only two chips were affected.

Competitor Advanced Micro Devices (AMD) told Reuters that while the new requirements would halt the sales of one of its artificial intelligence chips, it believes others will remain unaffected. AMD did not expect the new rules to meaningfully affect its business plans, according to Reuters.

Nvidia expressed concerns that if the U.S. government was unwilling or too slow in providing licenses, “the new requirement may benefit our competitors” as a result of the increased bureaucratic pressures and incentives for customers to “pursue alternatives to our products.”

Nvidia shares were down more than 5% in after-hours trading, according to the WSJ. AMD shares fell 2% in after-hours trading, according to Reuters.

AMD did not immediately respond to a Daily Caller News Foundation request for comment.