Nvidia shares fall after Biden administration releases updated export rule for AI chips

On January 13, 2025By Littum

Nvidia ( NVDA ) shares fell as much as 3% early Monday after the Biden administration published an updated export rule aimed at controlling the flow of artificial intelligence to “adversaries” such as China.

The White House said the rule would limit the number of AI chips called GPUs (graphics processing units) that can be ordered by most countries without a special license to 50,000. Smaller orders of 1,700 or fewer GPUs do not count towards the export cap. About 18 US allies, including Britain, the Netherlands and Taiwan, will not face any restrictions.

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“The United States must act decisively to lead this transition by ensuring that American technology supports the global use of artificial intelligence and that adversaries cannot easily abuse advanced artificial intelligence,” the White House said in a statement Monday.

For reference, Microsoft (MSFT) alone allegedly bought 485,000 of Nvidia’s Hopper GPUs in 2024 alone, while Meta (META) bought 224,000 of the AI chips, according to The Financial Times.

The rule aims to close loopholes in previous export restrictions on AI chips in 2022 and 2023 “by deterring smuggling” and “raising AI security standards,” the White House said.

“While there have already been some restrictions on chip sales, there have been reports of high-end NVIDIA chips coming to China, likely due to the fact that NVIDIA has limited control over its resellers,” said DA Davidson analyst Gil Luria to Yahoo Finance in an email.

In addition to Nvidia’s high-end chips sold through resellers, Nvidia makes specific versions of chips that comply with current US trade restrictions on China. According to the FT, Nvidia’s H20 chips – its Hopper chips for China – will not be covered by the new rule.

Nvidia CEO Jensen Huang holds a new Nvidia GeForce RTX 5090 graphics card and an RTX 5070 laptop as he delivers a keynote speech at CES 2025, an annual consumer electronics show, in Las Vegas, Nevada, U.S. January 6, 2025. REUTERS/Steve Marcus/ File Photo · Reuters / Reuters

Nvidia vice president of government affairs Ned Finkle said in a statement Monday that the rule was “crafted in secret and without proper legislative review.”

“And by trying to manipulate market outcomes and stifle competition — the lifeblood of innovation — the Biden administration’s new rule threatens to squander America’s hard-won technological edge,” he said.

Companies have a longer than typical 120 day period to provide comments on the restrictionsBloomberg reported, giving the Trump administration time to make changes to the rule, which is set to take effect in a year. Nvidia’s statement included an apparent appeal to the incoming administration.

“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,” Finkle said. “We look forward to a return to policies that strengthen American leadership, strengthen our economy, and maintain our competitive advantage in artificial intelligence and beyond.”