By Adam Clark and Brian Swint
Nvidia stock was falling as the chip maker pushed back against a last-minute rush by the Biden administration to issue new regulations over artificial-intelligence technology. The company has made an explicit appeal to President-elect Donald Trump to reject such policies.
Nvidia shares were down 4.2% at $130.25 in early trading on Monday, having fallen around 9% in the previous five trading sessions. Other chip makers were also dropping, with Advanced Micro Devices dropping 0.9% and Intel falling 1.7%. That was dragging on the Nasdaq Composite Index, which was down 1.5%.
While Nvidia's most advanced AI chips are already subject to a series of export controls -- concerning China, particularly -- it now faces the potential for even more restrictions.
The Biden administration on Monday outlined rules imposing caps on how many advanced AI chips can be exported to certain countries and require a license to export the data that underpins the most sophisticated AI systems.
"[The regulation] streamlines licensing hurdles for both large and small chip orders, bolsters U.S. AI leadership, and provides clarity to allied and partner nations about how they can benefit from AI. It builds on previous chip controls by thwarting smuggling, closing other loopholes, and raising AI security standards," the White House said in a statement.
A group of 18 U.S. allies are set to retain full access to U.S. semiconductor technology but most countries would be hit with new restrictions. Smaller orders from customers around the world -- up to around 1,700 advanced AI chips -- won't require a license or count against caps on countries' chip purchases, the White House said.
Technology stocks have been hit by increasing doubts about whether the Federal Reserve will cut interest rates this year following strong U.S. jobs data.
"In its last days in office, the Biden Administration seeks to undermine America's leadership with a 200+ page regulatory morass, drafted in secret and without proper legislative review. This sweeping overreach would impose bureaucratic control over how America's leading semiconductors, computers, systems, and even software are designed and marketed globally," said Ned Finkle, Nvidia's vice president of government affairs, in a statement.
While the majority of Nvidia's sales are to American companies and its exports to China are already restricted, the new rules threaten chip investments by national governments -- what Nvidia has termed 'sovereign AI' -- as a driver of sales. In particular, Middle Eastern countries such as Saudi Arabia and the United Arab Emirates, which are expected to be major purchasers of AI hardware, would be subject to limits.
The proposed rules have aroused criticism from the wider chip industry, with the Semiconductor Industry Association suggesting new policies should be designed by Trump's incoming administration.
Nvidia also looks to be hoping that Trump will prevent the implementation of stricter chip-export curbs.
"Although the rule is not enforceable for 120 days, it is already undercutting U.S. interests. As the First Trump Administration demonstrated, America wins through innovation, competition, and by sharing our technologies with the world -- not by retreating behind a wall of government overreach. We look forward to a return to policies that strengthen American leadership," Finkle said.
Trump and his officials could choose to change or totally abandon the planned proposals, in line with his push for less regulation. However, the Trump administration's tariff plans carry their own uncertainties for the chip sector.
"While the uncertainty of Trump tariffs plays a role, incremental AI chip restrictions from the Biden Administration don't help," said analysts at Melius Research led by Ben Reitzes in a note on Monday. "Once there is more visibility on these two issues, we see performance improving."
Reitzes prefers Nvidia and custom AI chip maker Broadcom as the stocks with the best long-term visibility.
Write to Adam Clark at adam.clark@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 13, 2025 10:32 ET (15:32 GMT)
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