The Biden administration has blocked sales of some of Nvidia’s most-prized microchips to the Middle East amid rising concerns about China’s access to the critical artificial intelligence resources.
Nvidia, which is worth $1.2 trillion (£940 billion) and one of the world’s most valuable companies, has been ordered to seek permission when exporting chips to certain countries in the region, in an escalation of the White House’s national security curbs on advanced semiconductors.
The restrictions are believed to be an expansion of US efforts to thwart Beijing’s AI ambitions, designed to prevent the chips’ onward sale to the country and limiting Middle East organisations links to Chinese AI companies.
Nvidia’s H100 and A100 chips are instrumental to training software such as ChatGPT and are at the centre of a global race for computing power as countries seek leadership in AI.
Their sales are currently curtailed in China and Russia, but the latest action marks a major expansion of US trade controls beyond the two countries’ borders.
Nvidia, which disclosed the restriction in a US filing, did not reveal what countries were affected by the controls.
Saudi Arabia and the United Arab Emirates have both held discussions with China over deepening AI links and have placed orders for thousands of Nvidia’s chips.
Chinese researchers are believed to be heavily represented at the Saudi research institution King Abdullah University of Science and Technology (Kaust). Meanwhile, the US government has previously flagged the UAE as a potential “transhipment point” used by Russia to evade sanctions.
Sales to Iran and Syria are already blocked under the US sanctions regime.
“During the second quarter of fiscal year 2024 (the three months to July 30), the US Government informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East,” Nvidia said in a US filing.
One senior US trade lawyer said the restrictions were likely to take the form of an “is informed” letter from the US Bureau of Industry and Security, which forces US companies to secure approval to export to certain countries or customers on national security grounds.
“There will be a concern that they would be diverted to China from customers in the Middle East,” the lawyer said.
He added that Chinese companies may be seeking to devise AI systems on overseas computer systems because of a shortage of top AI chips in the country.
“They [the US] are concerned not just with exports of chips to China, but the ability of Chinese companies to train their AI software outside of China and bring it back to China.”
Both Saudi Arabia and the United Arab Emirates are spending millions buying thousands of Nvidia chips, known as graphics processing units (GPUs), in an effort to boost the oil-rich states’ tech sectors.
Saudi Arabia’s communications minister Abdullah bin Amer Al-Sawaha signed a strategic partnership plan with China last year that included a pledge to co-operate closely on artificial intelligence.
The White House blocked Nvidia from selling its top AI chips to China last year, the latest in a series of semiconductor restrictions designed to stop Beijing developing advanced AI that could be used in weapons or cyber attacks.
The company has redesigned some of its chips to meet the requirements, although the White House is reportedly preparing to ban these as well.
It has said the restrictions would permanently hamper American companies’ ability to compete in China.
A spokesman for Nvidia said: “The licensing requirement referenced in our 10Q doesn’t affect a material portion of our revenue, and we are working with the US government to address it.”
A UAE spokesman said the country has a “legal export control framework and is continuously monitoring the export of dual-use products”.
The Saudi embassy did not respond to requests for comment.
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