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Disrupting the export of US chips threatens to paralyze the capabilities of Chinese companies to manufacture advanced technology

Chip maker Nvidia Corp said US officials have asked it to stop exporting two top-of-the-line chips for AI work to China, a move that could cripple Chinese companies' ability to do advanced work such as image recognition and disruption. The company said the ban, affecting the A100 and H100 chips, which are designed to speed up machine learning tasks, could interfere with the completion of the development of the H100 chip this year.

A spokesperson for Nvidia's competitor, Advanced Micro Devices, told Reuters that the company had received new licensing requirements preventing the export of MI250 AI chips to China.

According to the agency's report, US officials told Nvidia that the new restrictions came to reduce "the risk of products being used in China's military industries."

In response to a Reuters request for comment, the US Commerce Department did not specify new standards it has set for AI chips that can no longer be shipped to China, but said it was reviewing its policies and practices regarding China "to keep advanced technologies out of the wrong hands."

The announcement marks a significant escalation of the US crackdown on China's technological capabilities as tensions rise over the fate of Taiwan, where chips are made for Nvidia and nearly every other major chip company.

Without American chips from companies like Nvidia and AMD, Chinese companies would not be able to effectively manufacture the technology used to recognize images and speech.

Image recognition and language processing are common in consumer applications such as smartphones that can answer queries and tag images. This technology has military uses such as searching satellite images for weapons or bases and filtering digital communications for the purposes of intelligence gathering.

Nvidia said it has approved sales of $400 million of chips to China, which could be lost if Chinese companies decide not to purchase alternative Nvidia products. The company said it intended to apply for exceptions to the rule but had "no assurance" of receiving a positive response from US officials.

The chip ban comes as Nvidia last week already predicted a sharp decline in revenue for the current quarter on the back of a weak gaming industry. The company said it expects third-quarter sales to reach $5.90 billion, down 17 percent from the same period last year.