Nvidia Dumps On Reports Of US Gov't Restricting AI Chip Sales To Middle East

Shares of Nvidia fell late in the cash session Thursday after a Bloomberg report said the US government "slowed the issuing of licenses to chipmakers such as Nvidia Corp. and Advanced Micro Devices Inc." for "large-scale" AI accelerators, otherwise known as deep learning processors or neural processing units. 

The report, based on 'people familiar with the matter,' highlights the uncertainty surrounding a national security review based on AI development. The lack of a clear definition of what constitutes a large shipment further adds more uncertainty.

Sources said US government officials are focused on high-volume sales. This comes as Saudi Arabia and the United Arab Emirates ramp up AI data center spending and import massive amounts of chips. 

"With regards to the most cutting-edge technologies, we conduct extensive due diligence through an interagency process, thoroughly reviewing license applications from applicants who intend to ship these advanced technologies around the world," a US government official told Bloomberg, adding,  "As always, we remain committed to working with our partners in the Middle East and around the world to safeguard our technological ecosystem." 

A slowdown in the export of AI chips to the Middle East could be problematic for chip companies, especially Nvidia, which was recently thrown into an AI chip price war with Chinese tech giant Huawei. 

Translation: The US government reining in chip exports to the Middle East, plus intensifying competition in China, serves as a cautionary sign for investors following a strong earnings report last week. 

Nvidia shares dropped more than 2.5% on the report. 

How does this end well? 

Broader equity markets followed Nvidia lower into the late session.

This is terrible news for all those hedge funds piling into Nvidia (chart courtesy of GS): 

Great job, Biden. This will only mean the Chinese, i.e. Huawei, will flood the region with cheap AI chips.