TechDogs-"US Government Restricts Export Of AI Chips Leading To A $5 Billion Order!"

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US Government Restricts Export Of AI Chips Leading To A $5 Billion Order!

By TD NewsDesk

TD NewsDesk

Updated on Fri, Aug 11, 2023

Overall Rating
What's this new twist?

US president Biden's bold move to change the criteria for tech investment in China is in the spotlight.

This Wednesday, we saw the official release of an executive order from the Biden administration that would limit private equity and venture capital investments in Chinese technology. The verdict sends the strongest indication yet that the world's second-largest economy is off limits to U.S. tech investors who have grown concerned of the emerging cross-Pacific rivalry.

U.S. national security concerns about China's progress in high-tech fields have prompted President Biden to focus on investments in technology such as semiconductors, quantum computing and artificial intelligence.

Due to the country's failing economy and the tense political climate, U.S. investors have been gradually pulling their money out of China. According to PitchBook data, the combined capital deployed by U.S. private equity and venture capital firms into China hit a new low in 2022 and has remained low through the first half of this year.

In an interview, Elena McGovern, co-head of the national security practice at private equity advising firm Capstone, said, "We've had conversations with our own clients who have said, 'Yeah, look, we've really been pulling back on our presence in China for a little while. This is the first time that the U.S. government is imposing restrictions on how U.S. capital flows out of the country, and how U.S. investors are making investment decisions. So that is a new era.”
With the United States cracking down with sanctions, there a lot to think about for businesses.

Recently, there has been talk of AMD considering producing a dedicated A.I. chip for China whihc will comply with export laws. To many analysts and investors, any deal involving Chinese technology is too dangerous to pursue because of the likelihood that the embargo will be expanded.

Nvidia has also received orders totaling $1 billion for 100,000 A800 processors from Baidu, ByteDance, Tencent and Alibaba among other Chinese firms. The shipment of these chips is anticipated for this year. Moreover, these Chinese firms have ordered another $4 billion worth of GPUs from Nvidia, to be delivered in 2024.

"It's likely to deter investments in those sectors, even beyond what is explicitly prohibited," said Adam Hickey, a partner at law firm Mayer Brown and a former deputy assistant attorney general in the Justice Department's national security division. According to the author, "most investors want to avoid being seen as acting against U.S. national security interests."’

U.S. chipmakers have found success in China, especially in artificial intelligence (AI) chips and GPU sales. However, the latest restrictions will be a game-changer and both Chinese and American businesses need to realign strategies to find a way around the restrictions.

Will this move by the US government spell doom for the AI chip industry? Or will it foster innovation within the US as businesses look to find ways around the export restrictions?
Let us know your thoughts in the comments section below!

First published on Fri, Aug 11, 2023

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