The Biden administration is throwing a last-minute wrench into the AI trade.
Jensen Huang, co-founder and CEO of Nvidia. The company is speaking out against the Biden administration’s latest chip export rules.
On Monday, the Commerce Department outlined new rules that impose caps on how many advanced artificial intelligence chips can be exported to certain countries, along with additional licensing requirements for AI technology.
“This policy will help build a trusted technology ecosystem around the world and allow us to protect against the national security risks associated with AI, while ensuring controls do not stifle innovation or US technological leadership,” U.S. Secretary of Commerce Gina Raimondo said in a press release.
Raimondo said the new restrictions would keep advanced AI technology away from America’s adversaries.
The key difference in Monday’s announcement is the expansion of AI chip restrictions, licensing approvals, or caps to more than 120 countries beyond China. The number of countries impacted was first reported by the Wall Street Journal.
Investors reacted strongly to the latest news, sending chip names down on Monday. Nvidia shares were down 2%, while the SOX chip index was off 0.4%. Shares of Micron Technology, a maker of AI server memory, fell 4.3%.
But the selloff could prove short-lived, with the incoming Trump administration likely to take a different approach to AI controls.
Nvidia’s prospects for the China market were already diminished from prior restrictions put into place in late 2023. Those rules meant long-term revenue from China have curtailed as AI chip technology has advanced.
Nvidia says the new Biden policy is “unprecedented” and puts U.S. AI leadership in “jeopardy.”
“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,” Ned Finkle, Nvidia’s vice president of government affairs, said in a statement. “This sweeping overreach would impose bureaucratic control over how America’s leading semiconductors, computers, systems, and even software are designed and marketed globally.”
Part of Nvidia’s thinking is that by making it more onerous and difficult for companies in most of the world to attain Nvidia’s chips, it opens the door for China to expand its market share in the countries on the U.S. restriction list. The policy, critics contend, could ultimately strengthen China’s AI chips by making them the standard for those countries to build upon.
The good news for Nvidia is the new rules won’t take effect until after a 120-day comment period. Judging from statements against Biden’s prior AI executive order and against onerous AI regulations, the incoming Trump administration is likely to revoke or change the policy before that happens.
In October 2023, the Biden administration issued an executive order on artificial intelligence, invoking the Defense Production Act. It required companies to report and send test results to the government when developing more powerful versions of AI systems among other regulations.
Trump made repealing the AI executive order a central tenet of his presidential campaign. “We will repeal Joe Biden’s dangerous Executive Order that hinders AI Innovation,” his campaign platform said.
The Trump transition team didn’t immediately respond to a request for comment on the latest AI restrictions.
It’s likely Trump will revamp any AI chip policy to fit his administration’s objectives.
“We will WIN the battle for A.I. superiority, which is key to National Security and our Nation’s Prosperity,” Trump said in late November, when he nominated Gov. Doug Burgum to lead the Interior Department, adding the U.S. would lead in AI technology innovation by cutting regulation.
Nvidia’s business would likely see a boost if the Trump administration eases the buildout of AI infrastructure and relaxes rules around the development of nuclear reactors, which could be critical in providing sufficient energy for AI projects in the next decade.