The Biden administration is weighing further curbs on the sale of AI chips to China

The Biden administration is weighing further curbs on China’s ability to access critical technology, including limiting the sale of advanced chips used to power artificial intelligence, according to five people familiar with the discussions.

The curbs would limit sales to China of advanced chips made by companies such as Nvidia and Advanced Micro Devices and Intel, which are needed for the data centers that power artificial intelligence.

Biden officials have said China’s artificial intelligence capabilities could pose a national security threat to the United States by strengthening Beijing̵[ads1]7;s military and security apparatus. Among the concerns are the use of AI to guide weapons, conduct cyber warfare and operate facial recognition systems used to track dissidents and minorities.

But such curbs would be a blow to semiconductor makers, including those in the United States, which still generate much of their revenue in China.

The discussions were previously reported by The Wall Street Journal. Nvidia’s shares closed down 1.8 percent on Wednesday following reports of potential export cuts. The company has been one of the primary beneficiaries of the enthusiasm over artificial intelligence, with its share price rising about 180 percent this year.

Such additional restrictions, if enacted, would not have an immediate impact on Nvidia’s financial results, Colette Kress, Nvidia’s chief financial officer, said Wednesday on a call with reporters. But in the long term, they will “result in a permanent loss of opportunity for American industry to compete and lead in one of the world’s largest markets,” she said. She added that China typically generates 20 percent to 25 percent of the company’s data center revenue, which includes other products in addition to chips that enable AI

The share prices of chip companies Qualcomm and Intel fell less than 2 percent on Wednesday, while AMD fell 0.2 percent.

Intel declined to comment, as did the Commerce Department, which oversees export controls. AMD did not respond to a request for comment.

Curbing the sale of advanced chips would be the latest step in the Biden administration’s campaign to starve China of advanced technology needed to power everything from self-driving cars to robotics.

Last October, the administration issued sweeping restrictions on the types of advanced semiconductors and chip manufacturing machinery that could be shipped to China. The rules were applied across the industry, but they had particularly strong consequences for Nvidia. The company, an industry leader, was barred from selling China its top-of-the-line A100 and H100 chips — which are adept at running the many processes required to build artificial intelligence — unless it first obtained a special license.

In response to these restrictions, Nvidia began offering the downgraded A800 and H800 chips in China last year.

The additional restrictions being considered, which would come as part of the process of finalizing these earlier rules, would also prevent sales of Nvidia’s A800 and H800 chips, and similar high-end chips from competitors such as AMD and Intel, unless those companies have obtained a license from the Ministry of Trade to continue shipping to the country.

The deliberations have touched off an intense lobbying battle, with Intel and Nvidia working to prevent further curbs on their business.

Chip companies say cutting them off from a major market like China would significantly eat into their revenue and reduce their ability to spend on research and innovation of new chips. In an interview with The Financial Times last month, Nvidia CEO Jensen Huang warned that the US technology industry is at risk of “enormous damage” if it is cut off from trade with China.

The Biden administration has also internally discussed where the line should be drawn for chip sales to China. Their goal is to limit technological capabilities that could help the Chinese military guide weapons, develop autonomous drones, conduct cyber warfare and operate surveillance systems, while minimizing the impact such rules would have on private companies.

The move, which will come as the United States also considers expanded curbs on American investment in Chinese technology firms, is also likely to upset the Chinese government. Biden officials have been working in recent weeks to improve bilateral relations after a fallout with Beijing this year, after a Chinese surveillance balloon flew over the United States.

Antony J. Blinken, the secretary of state, traveled to Beijing this month to meet with his counterparts, and Treasury Secretary Janet L. Yellen is also expected to travel to China soon.

During a Wednesday appearance at the Council on Foreign Relations in New York, Blinken said China’s concern that the United States was trying to slow its economic growth was “a long-standing part of the conversation we just had in Beijing.”

Chinese officials, he said, believe the United States is seeking “to contain them, globally and economically.” But he disputed that notion.

“How is it in our interest to let them get technology that they can turn and use against us?” he asked, referring to China’s expanding nuclear weapons program, its development of hypersonic missiles and its use of artificial intelligence “potentially for repressive purposes.”

“If they were in our shoes, they would do exactly the same thing,” he said, adding that the United States imposed “very targeted, very narrowly defined controls.”

Nvidia’s valuation had risen in light of the recent boom in generative artificial intelligence services, which can produce complex written answers to questions and images based on a single request. Microsoft has teamed up with OpenAI, which makes the chatbot ChatGPT, to generate results in its Bing search engine while Google has built a competing chatbot called Bard.

As companies race to incorporate the technology into their products, demand has increased for chips like Nvidia’s that can handle the complex computing tasks. That momentum has helped push Nvidia’s market capitalization to over $1 trillion, making the company the world’s sixth largest by value.

Nvidia said in an August filing that $400 million in revenue from “potential sales to China” could be subject to US export restrictions, including sales of the A100, if “customers do not wish to purchase the company’s alternative product offerings” or authorities failed to grant licenses to let the company continue to sell the chip in China.

Since the restrictions were imposed, Chinese chip makers have sought to overhaul their supply chains and develop domestic sources of advanced chips, but China’s ability to produce the most advanced chips remains years behind that of the United States.

Dan Wang, a visiting scholar at Yale Law School, said the impact of advanced chip restrictions on Chinese technology companies was uncertain.

“Most of their business needs are driven by less advanced chips, as fewer of them play at the fringes of the most advanced AI,” he said.

Joe Rennison and Don Clark contributed reporting.